Coronavirus and Business Interruption - Updated Guidance

By Richard Graham Divisional Director - Claims & Risk Management

Close-up black and white image of a virus particle with spike proteins, similar to a coronavirus, against a blurred background of other particles.

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Covid-19 is clearly breaking new ground and the current situation is unprecedented.

The UK Government recently announced new measures to slow down the spread of the virus with the aim of helping the NHS to cope with demand. The situation is incredibly fluid and will undoubtedly continue to change in the coming days, weeks and months.

Whilst there is no shortage of information from news and social media channels, there is little clarity on what you should do in your business. We have set out our views of how the insurance market is responding below and are always happy to speak to you directly to help you understand your insurance cover at this time.

As made clear in the press and in our recent communication, we are expecting significant pushback from insurance companies regarding business interruption / contingent business interruption claims despite the recent assurances from the government in its daily briefings. Similar to insurance policies elsewhere in the world, physical ‘damage’ needs to occur before business interruption insurance cover is triggered. A voluntary or mandatory closure as prescribed by the UK Government is unlikely to be covered by most policies due to the lack of ‘damage’. We are investigating legal theories that may exist to find coverage under the current insurance, although the stance as of today is that it is unlikely that your policy will respond.

However, Covid-19 is unprecedented and the financial and non-financial impact, to a large extent, remains unknown and therefore whilst the support measures very recently offered by the UK Government (including the Government-backed business interruption loans) are welcomed, they may well decide in the future to take this a step further and compel insurance companies to grant policy coverage in some shape or form. Alternatively, the UK Government may well provide further direct support to UK businesses depending on whether the recently announced support package goes far enough. This is of course too early to call and, at the moment, remains speculation.

Given the current uncertainty, we suggest the following practical steps:

Keep accurate financial records during the time in case the UK Government introduces an initiative to recompense or support.
Contact your local MP to request that, given the uncertainty surrounding insurance coverage, UK Government takes action to support UK businesses.
Remain vigilant regarding situation updates and heed UK Government and other guidance regarding the health & safety of your employees.
Remember to keep us up-to-date on any changes to your business e.g. any changes to products being manufactured or sold, territories sold to, or the occupation of any premises or property. These are all examples of material facts that need to be disclosed to Insurers.
Similarly, please remember to continue to adhere to all policy terms and conditions such as Security Conditions for example.
For those who need to work from home, please ensure that you have sufficient insurance cover in place for laptops and equipment.

As already mentioned, the situation is fluid and changing on a regular basis. We will do all we can to keep our clients up-to-date on developments.

If you have any concerns or questions about your specific insurance cover or need to talk to us about changes to your business, please speak to your usual Performance contact. In the interim, please click here for more guidance on how to form a pandemic plan.

Further links and information:

Financial support for businesses during coronavirus (COVID-19)

Statement on business insurance and Coronavirus

Film & Media Insurance

Useful Links

Performance is a trading name of Howden UK Brokers Limited, which is authorised and regulated by the Financial Conduct Authority No. 307663. Registered in England and Wales under company registration number 02831010. Registered Office: One Creechurch Place, London, EC3A 5AF. Calls may be monitored and recorded for quality assurance purposes.