The short answer is that most commercial insurance policies do not cover COVID-19.
If you are a Landlord the tenant is still expected to pay the rent under the terms of the lease. A commercial tenant should look to their own business insurance to see if there is any cover available.
If there is any cover it will be in the business interruption section of a business policy. The business interruption cover is intended to cover loss of income following damage. Therefore, you will need to look at non damage extensions such as denial of access and supplier/customer extensions. These extensions also mainly relate to damage to surrounding property or damage at the customers or suppliers premises but some refer to notifiable diseases or specified diseases.
Again, most policies will exclude COVID-19 and where the wording is wide enough to include COVID-19 the cover will operate from when COVID-19 was made notifiable.This varies throughout the UK. COVID-19 became notifiable in Scotland on 22 February 2020, and in Northern Ireland on 29 February 2020, whilst in England the authorities only took the decision to make it notifiable on 5 March 2020.
Even where cover for business interruption losses is established, there will be inner limits that often apply and inevitably then be disputes over causation and measurement of loss. Where a business elects to implement or follow certain measures for the protection of its employees or customers, the position will be different from that where it is following mandatory orders from a public authority. Even where a business is forced to close or scale down its operations, there will be arguments over to what extent the losses are caused by the immediate effects on the business, rather than the effects on the wider marketplace and the absence of customers.
We can therefore anticipate ‘wide area damage’ type arguments being raised by insurers, relying on the principle in the Orient Express case, where a hotel in New Orleans was prevented from recovering its lost profits following Hurricane Katrina, on the basis that damage to the wider area meant that even if the hotel had been able to continue operating, it would have had no custom anyway.
This is a developing situation and insurers themselves are not all entirely sure of the implications and are checking the cover they provide. Our own experience is that the cover is rarely provided by insurers and where it may have exposure it is because their wording has not followed normal market practice. However, if your insurance does cover business interruption that does include notifiable diseases then it may be prudent to notify a claim to comply with insurers claims notification conditions.
Other policies such as travel and event insurance have their own considerations.
Other Considerations –
Unoccupancy – Insurers typically have security and inspection conditions in their policies where properties are long term unoccupied (typically 30 days but can vary). It is expected that insurers will be reasonable in the application of their policy conditions given the exceptional circumstances. However, there is no common approach from insurers, as yet, so if you feel you may deviate from what is required it is recommended that you contact your broker or insurers to advise them of the actual position. In the interim adopt practical common sense measures. For example – unplugging unnecessary electrical equipment, ensuring there is no post accumulation from street facing letter boxes which can be a fire hazard, securing the property and any outside bins, avoiding any external accumulation of combustible materials near buildings.
Homeworking – if you have removed equipment to work from home or acquired additional equipment you need to tell your broker/insurer.
Claims – Insurers are also following Government advice and limiting their interactions. This can mean that loss adjusters are finding remote ways to work which might be accepting electronic claims including photographic evidence. Emergency repairs can be a challenge but insurers should be the first point of contact as they should have contingency plans in place.
Change of business – if you have re-purposed your business to help with the crisis you will need to inform your broker/insurer.
UPDATE as at 18/1/21 –
Whilst we welcome the Supreme Court judgement in favour of the FCA and policyholders it does not mean that all Covid 19 BI claims will automatically be settled. In addition the ruling only applied to ambiguous wordings and therefore the majority of insurer wordings will still provide no cover for the pandemic.
The next step is the further review of each claim on its own merits. That review is being conducted by insurers and we are actively engaging with them at a senior level to ensure this is done as quickly as possible.
Our further advice will follow as soon as possible.
Do not hesitate to contact RMK for further information.