As the Coronavirus global pandemic shuts down businesses and brings entire industries to a standstill, controversy is growing over the amount businesses can claim from their insurance policies. Companies are arguing that they have been paying insurance premiums for business interruption coverage and are well within their rights to make a claim, but insurers are insisting that pandemics are explicitly excluded from any such policies.
What Does Business Interruption Insurance Cover?
Business interruption insurance is ultimately designed to cover the cost of physical damage to a building or premises. For example, if a restaurant had a fire and remained closed for a period of time, the insurance would cover the lost business during that time.
What Is Excluded?
As with all insurance policies, the small print of a business interruption policy lists exclusions, and infectious diseases are one of the named exclusions. This has been the case since the outbreak of SARS in the early 2000s. Businesses have had the option to pay for add-ons that would cover infectious diseases, but the take up of this has not been very high. Insurers are now saying that even this specific add-on was not designed to cover the catastrophic effect brought about by Coronavirus.
Such add-ons are more designed, for example, to protect a food establishment against an employee contracting an infection such as norovirus, coming in to the premises and spreading the virus, and the premises having to be closed for a period of time to be deep cleaned, and the loss of business that occurs as a result.
Business interruption insurance was never intended to provide cover for a global pandemic that started in another country.
Are There Any Exceptions?
There are potentially lots of exceptions. While insurance providers have been playing down the extent of coverage provided by business interruption insurance for the Coronavirus pandemic, lawyers acting on behalf of policy holders see it very differently. Policy wording is most definitely open to interpretation – what the ambiguous wording says and how it can be interpreted by different people. As a result, there are currently 2 Class Action Groups taking on insurance providers Hiscox and RSA over their failure to pay out on their respective business interruption policies.
Can You Buy Cover For Pandemics?
At present, taking out any sort of insurance that covers the costs to a business as a result of the Coronavirus outbreak is next to impossible. Insurance companies have been tightening the terms of their policies to leave absolutely no doubt that coverage for infectious diseases is excluded.
As a result of the SARS outbreak in 2003, the organisers of Wimbledon took out a specific Pandemic Insurance, making it one of the few sporting events prepared for the Coronavirus outbreak. However, this came at a hefty price of £1.5 million per year. Due to the cancellation of the event in 2020, and after 17 years of cover, the organisers are set to receive an insurance pay-out estimated at £114 million.
Tony Buckingham, Managing Director of Buckingham Insurance says “It is cost prohibitive to most businesses to take out a niche insurance policy that covers a pandemic. Wimbledon paid £1.5 million a year for 17 years for their specialist cover. Business interruption insurance names individual diseases that are covered and originate in your premises. Policies tend to exclude pandemics and SARS hasn’t been covered for some time. In terms of a future Pandemic Insurance being available, it is very difficult to take out insurance to cover something that is unknown, and where there is no way of assessing the total level of risk.”
To discuss your insurance requirements and to make sure you are adequately covered, please contact us or telephone one of our friendly staff on 01246 575 625 (Clowne) or 01773 748 627 (Ripley). They will be more than happy to answer any questions you may have.