Events are moving far more quickly than any of us imagined. As the ongoing coronavirus pandemic sweeps across the world, governments are taking unprecedented measures to slow down its spread. And here in Britain, vast numbers of businesses have been affected.
Those affected fall into various categories. Some have simply been closed under government orders and others have seen their activities curtailed because of the ban on large gatherings.
One thing is certain, due to the latest government restrictions on movement of people there will be very few businesses and sectors that are not affected by this.
But one thing unites them: many of those businesses imagined that they had business interruption insurance cover which would compensate them.
Read the small print
Here at The Legal Director, we have a very simple message regarding insurance cover during the coronavirus crisis. If your business is one of those businesses assuming that insurance cover would provide a measure of protection, our advice is to check the wording very, very carefully. If in doubt, speak to your insurance broker.
Because in the vast majority of cases, we suspect that businesses won’t have the protection that they are assuming.
With basic business interruption insurance, cover is dependent on physical loss or damage: that’s usually the wording in the policies. Unfortunately for businesses impacted by the coronavirus crisis, their closures aren’t due to physical loss or damage.
Some businesses have what is known as extended business interruption insurance, which covers a wider set of events. Many such policies, for instance, mention specific diseases. Unfortunately for businesses impacted by the coronavirus crisis, the list of specified diseases probably won’t include coronavirus—it’s simply too new. And if it’s not listed, businesses won’t be covered for it.
Still other business interruption insurance is known as contingent business interruption cover, which covers businesses against interruption due to disruption in their supply chains. Again, unfortunately for businesses impacted by the coronavirus crisis, the problem is that the cover generally relates to physical loss or damage: coronavirus won’t be listed as a specified causal factor.
Policies vary: check carefully
Inevitably, the guidance above is somewhat generalised. Nevertheless, we expect it to be applicable in the vast majority of cases.
If in doubt, businesses will want to drill down into the detail of their policies, and check the small print—very, very carefully.
Talking to your insurance broker is also a good idea. Unfortunately, though, our experience is that the brokers in question simply confirm the above.
And that holds true whether the business interruption in question stems from government advice (such as with the initial guidance regarding pubs, restaurants and theatres on Monday March 16th), or government order (as with the more widespread closure order on Monday, 23 March).
Here’s a statement from the insurance industry’s trade body, The Association of British Insurers:
“Irrespective of whether or not the Government orders closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed by the coronavirus.”
Force majeure: a new development
So is there any good news to be found?
Yes, in a small way.
If you read our earlier blog last week about coronavirus and force majeure clauses, the existence of a government order to close can be helpful for businesses.
That’s because while force majeure clauses might not refer to epidemics or pandemic—and many don’t—a majority are likely to refer to an act of government. Which now exists.
So if your force majeure clauses weren’t looking helpful last week, they might be this week.
As we said at the beginning, it’s a fast-moving situation.
Strange new world
It’s not an exaggeration to say that the present situation is unprecedented.
Here at The Legal Director, we’re aware of the pressures many of our clients are facing. Rest assured, we’re responding.
And going forward, as you would expect, we consequently expect to be doing more out‑of‑hours calls, more video‑conferencing, more e‑mailing, as we help our clients navigate through these uncertain times.
If our client legal directors can help you, and your business, pick up the phone, or send us an e-mail.
