20/03/2020
Covid-19 & Business Interruption Insurance
For the last couple of weeks, my team and I have been busy reading a variety of insurers policy wordings, advising clients as to whether they have any relevant cover in place within their insurance policies to assist with the current situation.
Whilst every insurers terms and conditions vary the general picture for small to medium sized business insurance policies, is as described below;
Business Interruption
Business Interruption insurance is an optional benefit, which the insured can choose to include or exclude from their business insurance policy to meet with their individual business requirements and attitude to risk. You can include this section if you have insured property at your business premises (buildings, tennant’s improvements, contents - known as materiel damage cover).
The key purpose of the Business Interruption section is to provide cover relating to loss of revenue, gross profit or additional costs incurred, as a result of an insured materiel damage incident occurring at the insureds business premises.
The core insured perils under the Business Interruption section match the same insured perils as the policies materiel damage section, in that the cover is trigged if the loss is as a result of a fire, flood, explosion, lightning/aircraft impact event at the insureds premises.
As an example, if your business premises burned down, the materiel damage cover would pay to rebuild the building and replace your damaged contents (if you chose to insure them), whilst the Business Interruption section would cover any loss of revenue, gross profit, or additional costs incurred (whichever one you picked at policy inception) as a result of the fire.
Some insurers do offer additional covers within the Business Interruption section, over and above the standard cover. Disease is one of those additional covers which some insurers have included, however for a claim to be triggered under this extension (if your policy includes it) is that the disease must be at, or within a defined distance of the insured premises and the public authority must have declared the insured premises as being unfit/unsafe for use as a result and must be closed.
A few policy wordings which we have read do include a small amount of additional cover for if a key person (director, partner, senior manager) within a business is deemed to be unfit for work due to health reasons and the insured business incurs expenses in replacing that/those individual(s).
As mentioned at the outset of this message, every insurers terms and conditions do differ (particularly large corporate risk policies), so please do read your own policy schedule (to see which sections you have insured), then read the relevant insured sections within your policy wording document to understand the insured sections terms and conditions and any additional covers included by your own insurer.
Hopefully this helps to provide an explanation as to what the core feature and benefit of the Business Interruption section of a policy is and why Covid-19 isn’t covered by most policies.
Please do not hesitate to contact the office on 01484 818570, if you require any assistance.
