In last week’s publication on insurance matters, we addressed key issues on business interruption and travel covers, reflective of the immediate focus of client interest.
Much has happened in a week and we now focus on updating these reviews and also address other insurance issues relating to Covid-19 that are potentially of interest.
Again, no one policy wording is identical and specific advice on specific problems or issues must be undertaken, and these general principles and observations may or may not have individual applicability. Specific advice should be sought.
Business Interruption Insurance
There has been a lot of focus with our clients on business interruption cover and as anticipated, the coverage issues have centred on the types of clause addressed in our note.
Since our note, we now have a declaration of a pandemic and exclusion clauses need to be checked to see if pandemics are expressly excluded.
It is worth restating that there will likely be no cover for losses to a business simply because, without more, its employees fall ill.
The FCO have advised against all but essential travel to more countries, including now the US. This will trigger more recoverable losses. As advised before, travel to such countries is likely to invalidate travel cover.
The terms of each policy need to be carefully considered. Our attention has been drawn to some policies providing that some will not pay out unless a trip is imminent: some may not pay, even if there is an FCO ban on travel, if cancellation takes place more than a relatively short time in advance of the travel date.
While an airline cancelling a flight is not covered by most travel insurance policies, many airlines are offering refunds or allowing affected travellers to change their flights with no change fees.
If new trips are now booked, policy terms are invariably likely to provide that cover will not be afforded to any particular destination where circumstances could reasonably have been foreseen as giving rise to a claim at the time of booking.
This last week we have seen a greater focus on whether losses through cancellation of events are insured. Where policies provide for event cancellation cover, it is common to see exclusions for losses arising from communicable diseases leading to quarantine or restrictions on movement, and again if there have been government directions against travel.
Similarly if businesses have purchased loss of attraction insurance cover, insuring tourist attractions and hospitality venues against loss of income following a defined event, it is highly likely that cover for Covid-19 losses will be excluded; such insurance will have as its trigger the suffering of physical damage.
Some may well exclude or not extend cover for cancellation caused by infectious disease.
Finally, it may be material to coverage to show that there was an applicable government or authority direction that required the cancellation of an event. On the other hand, cancelling an event because of a poor uptake as a result of Covid-19 concerns is highly unlikely to trigger cover.
At present the focus has not been on liability cover as in these very early stages of the virus there has not been any material issue about claims being brought against businesses. In the UK, employers’ liability policies would not be expected to include terms excluding or limiting an insurer’s liability where an employer has not exercised reasonable care. It is also not inconceivable potential shareholder claims should in the future materialise against directors over business decisions taken in response to the outbreak, which would be a matter for directors and officers insurance. Public liability insurance would be the potential policy to respond against third party claims. Note that such policies can exclude cover for recklessness; failure to follow government guidance or direction are likely to be said by insurers to fall foul of such exclusions.
These clauses will be of increasing focus. We refer to our previous note but would further remind:
- Force majeure will not be implied; there must be express provision, and there must be an express force majeure term in the contract.
- Clauses may refer to ‘acts of God’, but it is unlikely that coronavirus is an ‘act of God’ under English law construction principles: pandemics are not usually considered so.
- To rely on force majeure, this must be the sole reason for the failure to render contractual performance otherwise, the event was unforeseeable and beyond a party’s control and all due loss mitigation has been undertaken.
For more information on these matters or any insurance related queries, please contact Stephen Netherway