What about my premises or office insurance?

The comments below are guidance and support to prompt you to think about the areas covered and points made. You should contact your insurer or Broker for advice before making any decisions about your own circumstances. The vast majority of standard SME insurance policies that provide cover for Business Interruption (Consequential Loss of Profits) will extend to include not only the obvious consequential losses from a Property Damage loss at the premises, but will often cover losses brought about by the temporary or enforced closure of a business as a result of an outbreak of a Specified Disease at the premises.

The key here is that the loss must be at the premises, though some policies may also include cover where the closure of the policyholder’s business may have resulted from an outbreak at another business premises within a specified radius of the policyholder or by the enforced closure by the authorities. Again, the key point here is that the outbreak is from a Specified Disease and in many policies, these are clearly listed and include such things as Malaria, Small Pox and Tuberculosis but alas not Covid-19, and therefore there is no policy cover for this. We have heard from many clients who say this is unfair, and that somehow insurers have deliberately sought to avoid claims even though the policy that they purchased was issued before Covid-19 was even known of so on that basis, it’s an unfair criticism. The reason why Covid-19 is not included in the list of Specified Diseases is because it has only recently been known of, and insurers have not therefore had the opportunity to consider the consequences of such an outbreak and the likely financial cost to them so that they could factor this into their policy rating. Most if not all of the Specified Diseases named in a typical SME policy are ones that have been known of for many years, where the numbers of outbreaks and people infected each year is relatively well known and where in most cases there is a vaccine for the disease limiting its spread and therefore the financial consequences to insurers providing cover for those diseases. In the case of Covid-19, the numbers of people likely to be infected is currently unknown but as at 08/04/2020 1,446,775 people globally have been recorded as having contracted Covid-19, and as there is currently no vaccine for this disease, the human and financial outcome is going to be significant. Insurance is fundamentally underwritten using a host of historical data to assess risk. Even if insurers had been aware of Covid-19, which we know they were not, it is highly unlikely that they would have offered carte-blanche cover as the financial consequences to them would have been catastrophic and few insurers would have survived having to pay consequential loss of profits claims for virtually every commercial insurance policyholder. There are many insurers out there and each company will have slight differences in the way that their policy wording reads, but the general consensus in the industry is that if you have a standard SME type commercial insurance policy, then you are highly unlikely to be covered for the consequential loss of profits arising from this outbreak of Covid-19. A very small number of SME policies may cover it but only because the insurer had inadvertently included a policy wording that is vague and can be challenged, but for those that include cover on a Specified Diseases basis then the answer is clear we regret to say. In summary to repeat the point, if anyone is in any doubt about their policy cover then they should challenge their insurer or Broker about this.

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