Covid-19 versus Insurers response
We are in the front-line of dealing with enquiries from business owners in relation to whether their business interruption cover will pay for any loss of profit as a result of closure due to Covid-19.
Business interruption cover
At this stage we have examined many commercial policy wordings and most of them require that in order for the infections disease cover to apply there must either be one of the following:
- a specified list of diseases – of which Covid 19 is not listed as it is a new disease – no cover applies
- infectious disease cover with no specified list of diseases – it must have occurred on the premises – unless a staff member is affected it may be impossible to prove – no cover applies
- infectious disease cover where it must have occurred within 1km/10km/25km/40km of the premises – possible cover if the business is close to a hospital or known case of Covid-19
- It must have been due to a closure order by the local authority – the only closure order so far is to schools and pubs – all other businesses are closing due to health and safety concerns for their staff and customers or due to lack of footfall and close voluntarily for economic reasons – no cover applies.
- If there is Denial of Access cover by a local authority on a ‘no damage’ basis
In any policy where it has cover for infectious diseases, there is a specified inner limit of flat sum usually €15,000 up to €50,000, or a percentage of the Business Interruption sum insured e.g. 20%, or a time limit e.g. 3 months.
To-date the government have only issued closure orders to schools and pubs. Mosts other small businesses e.g. coffee shops, retailers etc are closing because they have suffered a dramatic fall in turnover due to workers staying at home or ‘social distancing’. Insurers have no liability for the most part as there is no damage and no specific conditions or closure order as outlined above.
Some Insurers have come out with a certain amount of ‘spin’ to make it look like they are supporting customers through the crisis. However it seems that their explainers are mostly telling it as it is, and for anyone who takes the trouble to read into it, it is clear that they have little or no input to helping business at this time, other than refunding premium if policies are cancelled, or refunding part of the EL and PL premium for the period of closure. Insurance Ireland is the industry body and they have a Covid 19 Hub on their website – see here. This is little more than regular press releases with PR Spin.
Creative suggestions for Government support
Declan Black, Managing Partner of Mason Hayes Curran wrote a very interesting opinion piece in the Irish Times online on Friday 20th March outlining how Government could ‘cocoon’ businesses to allow them to keep paying wages and overheads by underwriting Insurers to help save the economy and jobs by providing indemnity for business losses up to a certain percentage – click here to read the article. We would be very supportive of his suggestion.
We would also suggest government issuing an immediate closure order to more impacted sectors so that they could avail of the protection of their insurancer policy under points 4 & 5 above.