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Can business interruption insurance help my Covid-hit company?

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Updated: 12th October 2020

Business interruption insurance typically covers damage to a property or premises – often following a fire or flood. It’s proved to be a complex area for insurers and businesses in 2020, due to the unprecedented nature of events this year.

If you have business interruption insurance you should carefully examine the policy wording, as there may be an extension that covers circumstances other than physical property damage.

The specific wording, and terms and conditions, of individual policies largely determine whether or not an insurer has to pay out, but there’s been a challenge in the courts for pandemic-related claims.

What is the purpose of business interruption insurance?

Business interruption insurance is intended to cover financial losses due to closure or disruption of trade for businesses affected by external events. These don’t necessarily involve extreme weather events – premises can be flooded due to burst water pipes or faults within the building, for example.

This type of insurance typically covers such areas as loss of revenue and additional staff expenditure, but in the light of the pandemic it’s equally important to consider what isn’t covered by your business interruption insurance policy.

Business interruption insurance and Covid-19

During the first wave of coronavirus, some business owners claimed on their business interruption insurance policy but were denied payment by their insurer. This ultimately led to a court case that was brought by the Financial Conduct Authority (FCA).

The court found in favour of the FCA following this test case that challenged insurers unwilling to pay out to businesses forced to close down because of coronavirus. It’s interesting to note, however, that the court case was also supported by insurers who were looking for some clarity in the matter.

What might be included in your business interruption insurance policy?

Infectious disease is sometimes included in this type of insurance, but it’s often specific to that business – an outbreak of norovirus, for example, that originated with a member of staff.

Some businesses may be covered if they’re denied access to their business premises for reasons other than fire/flood damage – when the government or local authority orders the business to close, for example.

Although communicable diseases have typically been excluded from business interruption policies since the SARS outbreak of 2003, some insurers do offer add-ons in this respect. You may have purchased extra cover for infectious diseases, but you need to read the small print of your policy for further detail.

Have you already made a business interruption claim?

If you’ve made a claim on your business interruption insurance policy and your insurer told you that you weren’t covered, it’s advisable to seek an interpretation of your policy from a specialist – you can also obtain a professional opinion on the likelihood of making a successful claim/challenging the insurer’s decision on a previous claim.

You’ll be able to access valuable guidance on how to present a claim for business interruption insurance in this complex situation, and receive professional support in negotiating with the insurer for a Covid-19 claim.

If the insurer rejects a claim against your business interruption insurance policy and you’ve gone through the insurer’s own complaints procedure, you may be able to make a complaint to the Financial Ombudsman Service (FOS).

For more information on business interruption insurance, and advice and support in making a claim, please contact one of our expert team at Real Business Rescue to arrange a free same-day consultation. We can offer reliable independent advice on the best way forward - we operate an extensive network of offices throughout the UK.

Keith Tully

Partner

0800 644 6080

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