Business interruption insurance: are you covered for COVID-19?

Whether small, medium or large, COVID-19 is likely to have disrupted your business to some extent, but could there be a silver lining in your company’s insurance policy?

In the light of the government’s guidance at the time of writing, it’s worth checking to see if your business is likely to be covered under any of your insurance policies, particularly if you hold business interruption insurance.

When choosing commercial insurance there is usually the option for business interruption cover to be included. The level of cover offered will depend upon the provider and the level of insurance the business required at the time of taking out the policy. In order to determine whether you may be covered, it will be necessary to review your individual policy carefully.

What is business interruption insurance?

This covers your company if the operation of your business is interrupted, at the insured premises, and results in a loss. A key point to note when checking your policy is what causes of interruption are insured, as this will determine whether you will be able to claim under your policy.

The causes are likely to vary and can include, for instance, damage to the premises by natural disasters or if your equipment breaks down.

Is coronavirus included?

Insurance policies are carefully worded and include various limitations on the circumstances under which the business may be covered. Cover may, for example, be limited to disruption caused by specific diseases named in the policy documents or to diseases that your local authority must be notified about.

It is important to be aware that the slightest change of phrasing in the wording of your policy may result in your business not being covered for interruption caused by the coronavirus outbreak.  If you are in any doubt, you should seek legal advice.

You should also consider the changing daily guidance by the government. This can determine whether or not your business can claim for business interruption. For example, the guidance currently differs between cafes/pubs (which have to be closed) and a takeaway (which can remain open).

What is covered by business interruption insurance?

The first item which is likely to concern most businesses is their loss of profits, especially under circumstances where they are unable to trade, as is the case for many due to the coronavirus outbreak and the resulting government restrictions.

Loss of profits may often be based on the previous month’s figures, so the business may receive what it would have made if the interruption had not occurred. The fixed costs of the business will often be included in these types of policy, again helping where you are unable to trade but may still have the overheads to cover.

It is worth noting that there are often extensions to the clauses which will further define the cover. For business interruption insurance these will often include diseases and the actions of competent authorities. The latter may be of particular interest to businesses both now and in the coming weeks as the situation continues to evolve. Again, this will depend upon the individual policy.

Top insurance tips for businesses

Going forward it is vital to understand what options are available to your business.

• Notify your insurer – tell them of your current situation as soon as possible and in accordance with your policy terms.
• Business interruption insurance - check the wording of your policy.
• If you are unsure, ask. We are happy to review and provide guidance to see if you are (or are not) covered under your current policy.
• Stay up to date with the government’s daily guidance.

Want to consider other elements, such as government support (including job retention schemes), managing cash flow or your general contractual rights in light of coronavirus?

Please visit our COVID-19 support pages, where you can access lots of free guidance notes and find out about our COVID-19 Business Helpdesk – another free service to help businesses cope with the ever-changing situation.

For more information or to discuss any issues facing your business please contact Susan Howe on 0191 211 7777 or email [email protected]