The Supreme Court recently announced that certain insurers must pay ‘business interruption’ claims for companies impacted by the first lockdown.
But – according to Ian Sandham, Operations Manager and Commercial Account Executive at Mark Richard (Brokers) – the vast majority of customers’ policies do not provide this cover. As a result, expectations are being created that are, in most cases, unlikely to be met.
Business Interruption insurance covers income losses, increased costs of working arising from an insured event such as a fire, flood or storm. It is purchased by some but not all businesses. There are many types of policy available with scope of cover varying significantly between insurers, but the typical policy will be on one of the following basis:
- Increased in cost of working only – generally for those whose business can carry on because they work on customers’ premises or they can work from home
- Loss of gross profit – typically for businesses selling a physical product such as retailers, wholesalers, manufacturers, motor traders
- Loss of revenue – typically for those providing a service
The first category will not provide any cover for Covid losses, the other two could possibly. This Supreme Court decision relates to just six insurers who have an extension of their business interruption cover for loss of income from any notifiable human disease. This extension is only applicable to a small minority of policies so in the vast majority of cases, there is no cover for Covid-19.
Ian told The Business Exchange, “the devil is in the detail. Just as an example, most policies either provide no cover for disease or limit it to a list of specified diseases which will not include Covid-19. So blanket statements we have seen in the media saying that all businesses can now claim is misleading and building up expectations unreasonably. We have had many clients ring us this week to claim who don’t even have business interruption insurance at all such as tradespeople with just public liability cover.
“Therefore, those businesses who have business interruption insurance should check with their broker or insurer if they do have cover but please note that the court judgement only applies to those businesses with the specified cover and does not compel insurers to pay claims for businesses without this cover extension.”
Pictured above: Ian Sandham, Operations Manager and Commercial Account Executive at Mark Richard (Brokers)