Does your business insurance policy cover Covid-19?

The Covid-19 pandemic has resulted in businesses facing an unprecedented situation. Among other restrictions, many non-essential businesses have had to close their offices and/or shops. This has invariably caused substantial financial loss. It is for times like these that businesses have taken out business interruption insurance.

In the wake of Covid-19, many businesses will be reviewing their insurance policies to see whether they are eligible to make a claim. For many businesses, sadly, it will be disappointing that the Financial Conduct Authority (“FCA”)
has confirmed that the majority of business interruption policies taken out will not have provisions covering Covid-19. These provisions usually relate to notifiable human infectious or contagious diseases, and are typically optional premiums.

Even in cases where the wording of an insurance policy appears to cover Covid-19, it has been reported that insurers are nevertheless refusing to honour the claim. As an example, the BBC reported on a policy which provided for cover in the event a business’s premises had to be closed in relation to “an occurrence of any human infectious or human contagious disease, an outbreak of which must be notified to the local authority“. Despite the policy wording appearing to cover Covid-19 the insurer, Hiscox, was refusing to pay out. The reluctance of the insurance industry to pay out even when Covid-19 appears to be covered in policies is deeply concerning. It inevitably raises the prospect that many businesses will collapse in circumstances where they otherwise should not.

The Financial Conduct Authority

On 15 April 2020, the FCA intervened and wrote to insurance firms, warning that the industry’s treatment of coronavirus claims would be scrutinised. The FCA’s letter stated that where there existed reasonable grounds to honour part of a claim, but not to make payment of these claims in full, then the insurer should consider making an interim payment. If they do not, then insurers were expected to justify their position in writing.

Although the FCA acknowledged that the insurance industry had no obligation to pay out in relation to the majority of insurance policies, it noted that there were policies “where it is clear that the firm has an obligation to pay out”. In these cases, the FCA outlined its expectation that insurance firms, in the face of valid claims, should pay out quickly so that financial pressures on small businesses were not “exacerbated by slow payment”.

How can we help?

Ellis Jones’ Banking & Finance Litigation solicitors have specialist knowledge and expertise across a broad range of areas acting for commercial clients in disputes with financial institutions. If you feel you may have a valid business interruption insurance policy covering Covid-19, and are unhappy with a decision from the insurer on your claim, please contact William Fox Bregman, Paul Kanolik or William Dooley of our Banking and Finance Litigation Department on 01202 525333 or via an email enquiry.