Coronavirus and Insurance: Things to consider
UKFT associate member Langton London has outlined a range of things to consider when looking at your business insurance policy in relation to the Coronavirus outbreak.
Insurance arrangements vary enormously and every wording is different, so it is important to examine the coverage. It is impossible to give a comprehensive, definitive position, particularly on business insurance, but here is some general technical information to consider when looking at your arrangements.
Commercial Insurance: Business interruption
Commercial policies will not usually cover a non-damage business interruption (NDBI) loss because business interruption is triggered by a claim under a material damage policy.
A policy may be extended to cover Denial of Access including infectious diseases. Such extensions will be subject to insurers’ different terms and conditions.
Some policies will be subject to the insurer naming COVID-19 within its list of infectious diseases covered (unlikely as it is relatively new).
In other policies (though less common) there might be unspecified infectious disease cover where the insurers do not specify the diseases covered.
N.B. Just because the Government has declared COVID-19 a notifiable disease does not mean it is covered under an insurers’ wording.
Where there is cover (named or unspecified) and the businesses trade or operation incurs a loss resulting from interruption of, or interference with business at the premises, because of an outbreak of an infectious disease then the policy may respond.
A Denial of Access extension may also include cover for interruption caused by the acts of Public Authorities, imposing for example a lockdown leading to denial of access.
This may cover infectious diseases with exceptions but may be limited to a certain radius around the insureds premises which won’t therefore cover distant locations such as airports, sources of tourists and suppliers/customers.
Those businesses that have NDBI cover that either includes Covid 19 or has unspecified infectious disease cover would expect to be able to claim for:
• loss of profits or loss of revenue or
• increased cost of working or
• additional increased cost of working, depending on the policy basis of cover. However, costs for the cleaning, repair and replacement may further be excluded.
The impact may be instant; for example, a lockdown would mean the immediate closure of a cinema; or may be delayed, for example overseas suppliers’ shipments.
It is worth noting also that Denial or Prevention of access extensions will often have a shorter indemnity period than the main policy for example 3 months may be common.
Some Suppliers or Customers Extensions to policies would include NDBI for notifiable or infectious diseases. However, those premises would usually need to be named in the policy schedule and the same terms and conditions as above may apply.
Extensions to cover that will include losses arising from Coronavirus/Covid-19 are now highly unlikely to be available.
Some underwriters may, if the policies does not have a contamination exclusion consider damage to have occurred if a business could prove (ie through swab tests) that the virus was present and the premises had to close for a deep-clean. This may trigger the business interruption part of the policy. However, proving such a claim would be very difficult.
The current situation is very challenging, and each case may have to be discussed on its own merits.
Things to consider:
Does your policy cover working from home?
Are staff taking home laptops and other IT equipment? What about sewing machines or any other items of small machinery?
Check with your provider if your policy covers this or if it needs to be extended.
Insurance policies in the UK normally only allow cover for an unoccupied premises for 14 to 30 days maximum.
If you are going to be out of your premises for longer than that, check with your provider whether your policy covers this or can be extended.
Changing/adapting business activity
Are you changing what you are making or adapting your business?
Check with your provider whether your policy covers this or can be extended to cover your new activities.
Insurance Cover via Langton London
Langton London is the appointed insurance broker for the UK Fashion & Textile Association and members can benefit from discounted rates for insurance as part of the UKFT Business Insurance scheme.
Langton has been working with RSA to agree extensions on its scheme for the UK fashion and textile industry to allow the following extensions to existing insurance policies during the current Covid-19 Lockdown.
Working from home is not automatically provided by your insurer if not already agreed to extend Employers’ Liability.
Under the UKFT Business Insurance scheme, companies must take all reasonable precautions to ensure that staff are working within their capability at home and their working environment has been “assessed” as far as it can be, accepting that this is likely to be a remote assessment.
As more staff are working from home and taking laptops and other IT equipment under all risk items. The UKFT Business Insurance scheme policy will be extended to cover All Risks items up to £2,500 per employee (£5,000 per household). These should include laptops, sewing machines and any other items of small machinery.
Insurance policies in the UK normally only allow cover for an unoccupied premises for 14 to 30 days maximum. Under the UKFT Business Insurance scheme, the policy can be extended when required, subject to companies taking all reasonable precautions to ensure that premises are as protected as they can be during this time. Guidelines can be given on request.
Changing/adapting business activities
Due to the Covid-19 situation, many fashion and textile businesses are changing what they are making, for example to shift production to scrubs or PPE. Langton London can provide cover, as long as companies inform the insurer exactly what new activities entail and who they are being produced/manufactured for.
For further information please contact Tony Gutteridge by either by email – firstname.lastname@example.org or phone 01737 305666.
UKFT is in constant dialogue with the government and is outlining the latest support available for businesses on our website. We will update the details as and when the situation changes.