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Coronavirus: What do policies cover?
Published on the 6th March 2020

The situation continues to evolve, but what cover is there under an insurance policy. As we face the very real prospect of a significant increase in Coronavirus cases, the question many policyholders will be asking is: what cover do I have under my Property policy if I am affected by this? Insurers are attempting to provide clarity, Lorega Ltd Loss Recovery specialists and HMG Contingency team provide an update.

Covid-19 is a viral disease. As such, the general view would be that it will not cause physical damage. However, this does raise the question as to what is damage? If staff on site fall ill from Covid-19, which results in the necessity to deep clean and sanitise the premises, is this not due to the infected staff virus having “damaged” the property surfaces such as handrails and door handles? There may be policy exclusions for contamination, but this is a grey area.

Generally, any losses arising would be interruption to the policyholder’s business rather than material damage. What cover may there be under a Business Interruption section of a policy for such losses? There are really only two areas where some cover may be available, both being under Business Interruption cover non damage extensions.

Notifiable Diseases

This extension is often headed Murder, Suicide and Disease. The majority refer to cover for “interruption of or interference to the business during the period of insurance following…” . They set out a list of specific notifiable diseases that are covered. Covid-19 is not normally among these, which is not surprising as it was unknown until recently. Therefore, there would be no cover under such wordings.

However, some covers are written on a non specified basis, typically covering “loss resulting from interruption of or interference with the business during the indemnity period following….any human infectious or contagious disease which is notifiable to the local authority manifested by any person whilst on the Premises…”. Under this form of wording, as Covid-19 is now a notifiable disease BI losses arising as a direct result of the disease affecting the business would be covered. However, the Association of British Insurers have stated that cover would not apply retrospectively. 

Denial of Access

If we approach a worst case scenario, it is probable that areas will be quarantined with travel being either severely restricted or cut off completely. This would have a significant impact on most businesses. Many policies contain a Denial of Access extension to the Business Interruption section. The majority typically require the denial of access to be as a result of “insured damage in the vicinity of the insured premises which prevents or hinders access to the insured premises”. As there would be no physical damage, there would be no cover under such an extension.

Some policies may contain a non damage Denial of Access clause which typically covers losses arising from “an incident during the period of insurance which results in a denial of access or hinderance in access to the insured premises imposed by any civil or statutory authority or by order of the government or any public authority”. There is usually a geographical limit such as the incident having to be within I mile of the insured premises, plus often a time trigger such as the denial must be for more than 24 hours.

Under such a non damage Denial of Access extension, then losses arising to the business as a direct result of such denial of access due to Covid-19 would be covered by the policy, however, the norm usually requires "damage" or a "danger" for a claim to be made.

Cancellation / Non Appearance

Many standard Cancellation policies would be issued with a Communicable Diseases exclusion which came into being following the outbreaks of Avian Flu and SARS. This cover can be bought back at a premium and in these situations prior to the outbreak of Covid-19 there will be cover subject to the specific policy’s terms and conditions. Post the outbreak of Covid-19 all Cancellation policies will likely carry a Covid-19 exclusion regardless of whether the Communicable Disease extension has been purchased.

With regard to non-appearance insurance policies, for cover purchased prior to the outbreak, should the Insured Person[s] suffer from Covid-19 resulting in a cancellation, there would be cover. The insured persons must be the individual suffering from the illness leading to the cancellation. A "Family Extension" could extend the cover if included and subject to the policy terms and conditions. Policies issued after the outbreak will likely have an exclusion. Insurers may entertain cover subject to the individual concerned and full underwriting information.

In summary, each policy will need to be reviewed to establish if they contain appropriate cover.

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