Many business’ have suffered financial loss due to the Government lockdown in response to the Covid-19 Pandemic from March 2020 onwards. Most small business policies do not provide cover for this type of loss, as generally speaking Business Interruption is restricted to financial loss suffered as a result of property damage. However, due to some ambiguity over policies which included Non-Damage BI extensions, the FCA carried out a test case in order provide clarity for insureds, and this has resulted in the recent Supreme Court judgement.
The Supreme Court gave their final judgement on the case on 15th January 2021.
Although the judgement found in favour of the Insured on this occasion this does not mean that every business will have a valid BI claim. Only policies with a Non-Damage BI extension, specifically Notifiable Disease and/or Prevention of Access, have been considered:
Covid-19 became a notifiable disease on 5th March 2020 and the Supreme Court has confirmed that Business Interruption claims as a result of Covid-19 should therefore be covered if this extension is included in the policy.
The Supreme Court refuted that any distance requirements under this extension would be a good enough reason to decline a claim. This is because the wording in many did not include “only”.. if within 25 miles, but also it can be assumed that a case of Covid would have occurred within 25miles of any premises, irrelevant of whether there was a positive test or not, as the wording does not specifically require evidence of the disease occurring within such limits.
The Supreme Court also disagreed with the original judgement that policy cover would only be relevant for the period of full cessation of the business, so the downturn in income can be considered from 5th March for a claim under the Notifiable Disease extension.
Prevention of Access
Claims can also be brought under a Prevention of Access extension as the Supreme Court has ruled that the Government enforced closures should be covered under this section. Prevention of Access claims would have an initial incident date of around the 21st March, dependent on the type of business, and as the insured can only claim under one section of the policy, then this section should only be utilised if the insured’s policy does not contain the Notifiable Disease extension.
The easiest way to check if the recent judgement affects you and see if your policy may extend to cover losses as a consequence of Covid-19 or not, is to visit the FCA website https://www.fca.org.uk/firms/business-interruption-insurance/policy-checker.
This is a free, unbiased system which will ask you about the key points of your policy to determine whether a valid Business Interruption claim is likely or not. It is important to note that your claim, like any other, will need to be evidenced; insurers will provide you with their requirements in due course if they have not done so already.
All insureds affected by the judgement should be contacted directly by their insurer, however, please note the insurer may only have your business address so you may need to check the insured premises for post.
If you require any further support or information regarding your policy cover, or advice on submitting a claim then please do not hesitate to get in touch with us. Due to current Covid restrictions we have less people available to take phone calls, so we would recommend that you email us where possible.
Insurers will also continue to provide regular updates and information about Business Interruption claims on their websites. To assist you please find below links to some of our most popular insurers:
Axis (previously Novae)
Business Interruption – AXIS (axiscapital.com)
With regards to Nationwide policies the insurers have provided the following confirmation:
HDI Global SE
“Unfortunately, the Policy and consequently any claim based on the Policy, are outside the scope of the Test Case for the following reasons:
a) The denial of access wording in the Policy provides cover in circumstances where access to the Premises was prevented or hindered. However, this wording requires “Damage” to property, whereas the Test Case is concerned with non-damage business interruption wording; and
b) The notifiable disease wording in the Policy requires an occurrence of a notifiable disease solely “at the Premises”, which places it outside the scope of the Test Case. The Test Case applies only to those policies which provide cover for an occurrence of a notifiable disease within a certain radius or the vicinity of an insured premises.
For these reasons, the recent Supreme Court judgment cannot be applied to your claim. This is primarily because the Notifiable Disease clause in your Policy has a strict requirement that there is COVID-19 “occurring at the Premises”.
Please note that the FCA did not include policies that require disease at the premises for consideration by the Court in the Test Case. These clauses respond to measures directed specifically at the premises rather measures taken on a national basis. As a result, the Supreme Court’s Test Case decision does not change the way that your Policy operates and our decision in respect of your Claim remains as previously communicated to you.
Under our policy provided by HDI Global SE (Please see your policy documentation), there is potential cover if restrictions have been placed on your business specifically a result of proven occurrence of COVID-19 the premises (as opposed to nationwide restrictions placed on different broad categories of business to prevent the spread of the wider disease outbreak, which will not trigger cover under the policy). If you wish to register a claim, please let us know providing full details and including the evidence that you are relying on. We suggest that you liaise with the broker through whom you purchased the policy should you require assistance.”
Accelerant Insurance Ltd
“15) Virus, Disease and Pandemic Exclusion
(not applicable to Employers Liability Section)
Notwithstanding any provision to the contrary within this policy, within any endorsement to this policy or within any extension to this policy, this policy and its endorsements (if any) and its extensions (if any) exclude any loss, damage, liability, claim, cost or expense (whether such loss, damage, liability, claim, cost or expense has been suffered by an insured or a third party) of whatsoever nature, directly or indirectly caused by, contributed to by, resulting from, arising out of, in connection with, or otherwise in any way directly or indirectly attributable to:
a) Coronaviruses; and
b) Coronavirus disease (COVID-19); and
c) Severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2); and
d) any mutation of or variation of a), b) or c) above; and
e) any infectious disease that is designated or treated as a pandemic by the World Health Organisation;
f) any fear or anticipation of a), b), c), d) or e) above,
regardless of any other cause or event contributing concurrently or in any other sequence thereto.”
It is worth noting that with effect from April 2020 virtually all new policies and renewals will have an exclusion similar to the above.
Updated 8th February 2021