Business Interruption Insurance: COVID-19
Many businesses have recently been forced to close due to the impact of COVID–19 and the necessary measures which the Government has taken in the interests of us all. A large number of businesses have been looking to their insurance policies to see whether they have a valid claim for compensation for business interruption.
Business interruption insurance compensates business for their losses due to closure or restriction of their activities. This usually arises when a business premises is damaged but may also extend to other causes.
Whether insurance companies will be legally obliged to accept liability on an insurance claim for business interruption will very much depend on the wording in the particular insurance policy and policy schedule. It is clear that many insurers are not accepting liability for business closures due to the COVID-19 crisis. Some businesses will need to threaten or issue proceedings against their insurance company in order to vindicate their rights.
Some of the key legal issues which will apply to these types of claims are as follows:
- Does the insurance coverage for business interruption extend to closure or restriction due to the outbreak of contagious disease? Many policies do have this extension.
- Are the diseases covered listed? If so, then it will be likely that COVID-19 is not covered.
- Does the outbreak have to be from a notifiable disease? This should not be a difficultly as COVID-19 has been a notifiable disease in Ireland for a number of weeks already. This issue was dealt with in the leading international case on the issue (Harbourview Hotel & others v. Ace Insurance & others (2012) Hong Kong Court of Final Appeal).
- Does the closure of business have to be on foot of a Government or Local Authority order or advice? This will depend on whether the business is in the category of business which has been ordered/ advised to close. There can be some grey areas as some businesses can continue to operate if they can do so in a safe manner.
- Does the notifiable disease have to have manifested itself on the business premises? This could be difficult to prove. Some policies state that the disease must have manifested itself on the premises or within a radius around it. This will be easier to prove.
- Are there any Exclusions within the policy which would remove this insurance cover?
- There is usually an inner limit of liability on business interruption and sometimes on interruption due to outbreak of a contagious disease. This should be checked.
Given the factors above, it is important for each business owner who has had to close their business due to COVID-19 to have their insurance policy checked to establish if they have a valid insurance claim. Given the wording of many policies it will usually be important to notify this claim within a short time period and therefore businesses should act fast on this issue.In addition, it might be necessary to issue proceedings against insurance companies to enforce the right to compensation.
If you want to speak to someone in our firm regarding a possible business interruption insurance claim please contact:
Conor Lupton Partner cl@ofx.ie 021 7301 271
Richard Neville Partner rn@ofx.ie 021 7301 273