Business Interruption Insurance through Covid

A number of businesses have looked to their Business Interruption Insurance (BII) when seeking to recover losses which have arisen as a result of the Covid-19 pandemic. On the whole, insurers have denied liability under the terms of the insurance or have generally been quite slow in responding.

In June 2020, the Financial Conduct Authority (the FCA) issued proceedings in the High Court by way of a test case to seek clarity about the meaning and effect of selected BII policy wordings in the context of Covid-19 claims, i.e. considering:

a) “Disease” clauses that provide cover following the occurrence of a notifiable disease within the vicinity of the insured premises;

b) “Prevention of Access” clauses that provide cover for a prevention or denial of access to or use of insured premises as a consequence of action by authorities; and

c) “Hybrid” clauses that refer to both restrictions on insured premises and the occurrence of notifiable disease.

The Judgment in that test case was handed down on 15 September 2020. The Judgment is complex and whilst each BII policy wording will need to be considered carefully, on the whole, the court found in favour for policyholders confirming that most (but not all) of the disease clauses in the sample provide cover and that also certain denial of access clauses also provide cover though this depends on how the business was affected by the Government’s response to the pandemic i.e. by way of a mandatory closure.

The Judgment is legally binding and therefore will be used by insurers generally in interpreting the exact wording of their policies. It is however possible that the Judgment may be appealed. The FCA has issued some guidance to assist insurers and policyholders in progressing such BII claims.

Should you have any queries in respect of the extent of your BII and/or a claim under your BII, please contact Akanshi Agrawal on 01702 352511.

Author: Akanshi Agrawal