COVID-19: Insurance issues – are you covered?

It is now clear that the COVID-19 pandemic will have a significant impact on the business community, with many suffering losses due to the social restrictions being put in place and the downturn in the economy. The losses may continue even once the virus is contained, particularly if an increase in litigation is seen as often accompanies tough economic conditions. Businesses ought to be now looking at their insurance coverage to identify whether any current losses can be recouped and to ensure adequate coverage for the storms which may follow. Below we flag some of the insurance issues flowing from COVID-19 which should be considered.

Business interruption cover

Business interruption insurance typically provides cover in respect of losses caused by the interruption to a business’ activities caused by an insured event. The insured events vary from policy to policy, but can include things like financial losses flowing from interruptions caused by property damage, a denial of access to the business premises, the inability of a key person to work in the business and supply chain disruptions. However, coverage under many of these policies may be contingent upon their being damage to insured property and, further, exclusions in respect of transmissible diseases are common. The availability and extent of any cover in respect of COVID-19 related losses will therefore depend on the nature and cause of the loss and the precise wording of the policy.

Travel policies

COVID-19 is devastating the travel industry, with significant travel restrictions and quarantine conditions in place and airlines cutting services and standing down staff. The terms of travel insurance vary widely, but in general the timing of the purchase of the policy is likely to determine whether cover is available.  Policies purchased before COVID-19 became known may provide some cover, whereas policies purchased afterwards are unlikely to afford any.

Cyber insurance

Reports are already circulating of ‘phishing’ scams where cyber-criminals are using the COVID-19 outbreak to obtain personal information which may then be used for fraudulent purposes. Businesses should ensure their cyber insurance coverage is adequate and any policy conditions are being complied with, particularly if working conditions have changed and employees are working remotely as a result of the pandemic.

Liability insurance

Liability policies provide cover to an insured party for its liability to others. These policies may become relevant in the claims made relating to the virus which are expected to follow. For example, a management liability policy may provide officers of a company with cover if claims of insolvent trading emerge, an employment practices liability policy may respond to claims if changes to a businesses’ workforce are made as a result of the pandemic and public liability cover may become relevant if someone contracts COVID-19 as a result of the insured’s failure to take reasonable care in preventing the transmission of the virus in its business.

The coverage available to a business under its insurance always depends on the precise terms of the policy wording and the nature or circumstances of the loss being claimed. The full policy wording should always be carefully reviewed. Businesses should also act promptly to notify insurers’ of potential claims, bearing in mind that delay may prejudice or preclude their rights to recovery.