Coronavirus (COVID-19) – An insurance Update
The outbreak of Coronavirus COVID-19 acute respiratory disease may cause a significant economic impact for businesses.
Business closures and lost sales will naturally give rise to questions as respects insurance coverage under property polices. Examples of the impacts associated with COVID-19 may include:-
- Cost of sanitizing and testing insured property
- Costs of evacuation of an insured property
- Resulting loss of income, either from the closure of the premises during sanitization or the loss of customers due to identification of the virus at the insured premises
- Contingent business interruption or extra expense due to the closure of a facility of a key customer or supplier.
Over the past few weeks W Denis has been collating responses from insurers regarding these types of costs and income losses and the summary of the position is as outlined below.
IMPORTANT: Any coverage analysis must be based upon the wording of an insured’s specific policy(ies) of insurance.
Most material damage & business interruption policies require some form of damage to occur at the premises before cover can be triggered. Depending upon the policy wording it is possible that cover may be available if it can be demonstrated that the premises has suffered “physical damage” if it has been contaminated with the virus and a “deep clean” is required. As we are in “unchartered” water with respect to this theory we do not know how insurers would respond to such a claim.
Some business interruption policies have a “Suppliers” and/or “Customers” extension, however, once again this is normally subject to a damage trigger, so the question is whether the insurer would consider contamination requiring a “deep clean” at a suppliers and/or customers premises is sufficient to be considered “physical damage”.
Material damage policies include a Protections Condition which requires that all security devices provided to protect the premises are properly fitted and put into full operation while the premises are left unattended.
Most material damage policies will include an Unoccupancy Condition that will apply after 30 or 45 days unoccupancy. Such a condition could require you to ensure that:-
(a) such unoccupied buildings are secured against illegal entry and all external doors and accessible external windows are fitted with good quality locks
(b) all services other than limited services required for security guards fire and burglar alarms shall be disconnected unless otherwise agreed by the Company in writing
(c) all letter boxes shall be sealed to prevent insertion of material
(d) perimeter fences walls and gates shall be kept complete and maintained
(e) such unoccupied buildings shall be kept clear both internally and externally of combustible materials and not be used for storage
(f) vegetation surrounding such unoccupied buildings shall be kept down
(g) the Business Premises shall be inspected thoroughly internally and externally at least once every seven days (or at a frequency agreed by the Company in writing) by the Named Insured or a responsible person appointed by the Named Insured and a record maintained of such inspection and any defects rectified without delay.
Insured perils may be restricted to Fire, Lightning, Aircraft and Explosion after 30 or 45 days unoccupancy.
IMPORTANT: All policies are different so any coverage analysis must be based upon the wording of an insured’s specific policy(ies) of insurance.
The majority of commercial policies list the type of infectious disease cover that is included under an Infectious Diseases extension. COVID-19 is not going to be listed as an insured infectious disease, so we do not believe that cover will apply here.
Although it is highly likely that an insurer will not agree indemnity, we suggest that if you wish a claim to be considered by insurers you confirm this to us as soon as possible in order that we can approach insurers to obtain a formal answer from them about whether they will indemnify you.
There are a small number of policies which have business interruption extensions that do not list the types of infectious disease that are covered, it is more likely that a successful claim may be made under these types of cover extensions. It is therefore essential that you examine your business interruption policy wording if you feel that you may be able to make a claim
Contingent Business Interruption insurance policies sometimes also offer cover where the trigger is loss of use of the property due to the action of civil authorities. Debate arises as to who or what constitutes a civil authority, and what action by them causes loss of use, for example, is it when they advise that properties should not be used, or when that advice has the force of law?
IMPORTANT: Again any coverage analysis must be based upon the wording of an insured’s specific policy(ies) of insurance.
Other Types of Insurance
Coronavirus COVID19 does not just raise questions relating to Physical Damage and Business Interruption, there are possible implications for insurance such as liability insurance and business travel insurance.
Employers & Public Liability Insurance
It is likely that Employers & Public Liability insurance policies will respond to COVID-19 claims although demonstration of a causal link by a plaintiff may be difficult to prove. Policy coverage will depend on the individual nature of the circumstances of the claim.
For more information
It is critical to review each policy of insurance in its entirety to determine the extent, if any, of coverage available for the effects of coronavirus COVID-19.
If you have specific coverage questions, please contact your W Denis representative.
Take Action Now
Organisations should review, test and update critical business continuity, crisis management and crisis communications plans. Consider the potential effects a worsening outbreak could have on your employees, revenue, suppliers, reputation and more. Immediate actions to take include:-
Protect your people first
- Stay up to date on the latest travel advice as it could change quickly
- Ensure your staff know to stay away from work if unwell and seek medical help
- Be conscious that your staff may have caring responsibilities for ill family
- Listen to and respond to staff concerns – anxiety can be more disruptive than the virus itself
- Institute work from home policies if warranted
Look after your business interests
- Know which business processes and activities are critical and require protection.
- Pay special attention to major customer and other business deadlines.
- Plan for how to continue operations if you experience significant staff absences.
- Prepare for potential reductions or increases in demand (i.e. cleaning services, e-commerce).
- Review your relevant insurance policies, coverage, and claims processes.
Secure your supply chain
- Identify your critical suppliers and their locations, especially if in heavily impacted areas or with less support resources available.
- Confirm the status and location of expected deliveries/shipments.
- Understand what your suppliers' plans are and work together to protect both of your interests, particularly if a smaller business.
The impacts from a potentially worsening novel coronavirus outbreak could be severe, but taking these steps now can help you better prepare, plan, and protect your people and operations.
Call us today on 0044 (0) 113 243 9812 or arrange a call back to find out how you could benefit from our intelligence-led insurance policies.