By Alex Balcombe, Partner at Harris Balcombe (www.harrisbalcombe.com)
After Leicester’s local lock- down saw the UK government order the immediate closure of non-essential stores and delayed the reopening of bars and restaurants, hundreds of businesses in the Midlands city are once again in limbo – not just over public safety but also financial security.
Despite the sudden loss of cash flow to businesses, some insurers are hitting people with a double whammy of tightened their terms to explicitly exclude COVID-19
from policies, and there’s no exception for Leicester businesses.There are also currently ‘no plans’ from the government for further financial aid. Some businesses invested money for the brief period they were able to reopen before the new lockdown, and while they are able to re-fur- lough staff, revenue continues to decline.
With MP Liz Kendall, of Leicester West, urging the rest of the country that “this is a warning for future local lockdowns”, can businesses look to their insurance for cover if their city is closed again? There are grants available, but not all businesses will be eligible for help.
THE DEVIL IS IN THE DETAIL
The pandemic has led many insurers to come under scrutiny for policy wording which often does not provide clarity to businesses as to what
theyarecoveredfor.AllianzInsurancePlc,forinstance,hasfacedgroup action after many business owners were denied claiming on their business interruption policy, which covered loss caused by interruption or interference to the business as a result of a notifiable disease within the vicinity of an insured location.
Insurers say most business policies simply do not cover pandemics. With Blackburn overtaking Leicester as the COVID-19 hotspot of Britain, and other cities such as Rochdale, Bradford and Luton enduring rising cases, is there anything that businesses at risk of sudden closure can do to claim on their business interruption insurance?
Many insurance companies are not allowing companies to add COVID- 19 to any existing business interruption policies. In fact, a large number of insurers have issued “mid term policy adjustments” to exclude anything to do with COVID-19, in light of so many people trying to make claims.
HOW COULD I BE COVERED?
The pool for insurance compliance has shrunk. But in theory, if you have an existing policy that includes one of the clauses identified below, and your insurer has not issued a mid-term adjustment to exclude COVID-19 then you may be able to make a claim following a second lockdown.
To be considered for cover for COVID-19, there are two types of policy extensions to your business interruption cover that can potentially cover you for this situation:
1 – Infectious Disease Extension
Many policies expressly state which diseases fall within the realm of being an infectious or notifiable disease. If this is the case, your policy will not provide cover.As it is a new disease, these policies will not have included COVID-19.
Other infectious disease extension policies will define the disease with reference to the actions of the government. Since the UK Government has named COVID-19 as a notifiable disease throughout the UK, it is possible that your business may fall into this definition, thus meaning you may be able to make a claim.
However, again, it’s not always that simple. Many policies require the disease to have been on your premises, while others specify a radius from your premises in order to qualify.
2 – Denial of Access Extension (non-damage)
Denial of Access Extension (non-damage) policies may cover you if you’re prevented from accessing your property.This could be due to an event, or by the actions of a competent authority, which could cause your business interruption cover to engage.
If covered by this clause, there are often very subtle differences in wording in your policy.This could depend on the insurer or policy.You may well be covered, but it will depend on your particular circum- stances, and the specific policy wording.
The risk of infection rate is vastly different across the UK, but as we’ve seen with Leicester, the government does have the power to lockdown a city overnight. It’s hard to establish clear principles when it comes to business interruption insurance, but you may be covered.
If you own a business and are unsure about whether you can claim for business interruption, or are confused about ambiguous wording, get in touch with a loss assessor.
These claims are not simple, but loss assessors will be able to help and guide you along the way, check your wording and work on your behalf to make sure you get everything you are entitled to.