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.