The arrival of the Covid-19 pandemic may not have been an absolute surprise to epidemiologists but for many businesses, it was a completely unexpected, despite the rapid spread of the previous SARS outbreak a few years ago. 

The All England Lawn Tennis Club (AELTC) showed extraordinary foresight by taking out pandemic insurance for the past 17 years, initially, in response to the SARS outbreak, which meant that the cancellation of the Wimbledon Championships that the AELTC was poised to host, was mitigated by a substantial insurance payout. 

Businesses turning to their commercial insurance policies were initially told by the insurers that the clauses relating to event cancellation and business interruption were unlikely to apply in respect of Covid-19. The insurers were seeking to rely on the judgment relating to the case in 2010, Orient-Express Hotels where a hurricane was responsible for the business interruption and the policyholders lost the case; in the test case brought by the Financial Conduct Authority (FCA) the Supreme Court ruled that the case was wrongly decided and was therefore overruled.  The prolonged presence of Covid-19 and the serious impact globally on every aspect of commercial dealings and transactions has resulted in many businesses hanging by a thread making the commercial insurance policies business interruption clauses a lifeline if the policy wording is deemed to support a claim.

The Financial Conduct Authority (FCA) issues regular updates with regard to business interruption payouts and claims and has issued comprehensive information and guidance following the Supreme Court judgment arising from its business interruption test case brought to clarify the position of businesses and insurers. The judgement supported businesses in many aspects relating to their commercial insurance policies, so far insurers have paid out £433,125,666 in settlement of business interruption claims.  However, the judgment was complex and hinged on the wordings of the policies. 

Vincenzo Senatore, a partner, commented "the wording of a business interruption policy is crucial following the Supreme Court judgment.  In some policies there is a requirement to prove the presence or the occurrence of a notifiable disease within the vicinity of the business premises.  If the area within which the presence occurs is not clearly defined the policyholder does not need to demonstrate that Covid-19 existed in any particular location." He further stated "the FCA wrote a "Dear CEO" letter reminding insurers of their responsibility to their policyholders, in that they must deal promptly with policyholders and communicate clearly, be fair and not be misleading."

Where policies do require specific evidence of the presence of Covid-19 in the vicinity of the business premises of the policyholder the FCA has provided suggestions as to the nature of the evidence and how such evidence can be gathered.  The business should obtain information from:

  • Local GPs as to whether they have patients that have tested positive.
  • Data from NHS hospital trusts in the vicinity on the number of people who have died as a result of Covid-19 within their trust. 
  • Reports from well-regarded media outlets relating to the number of cases believed to be in schools and care homes.
  • Personal knowledge from employees, customers or other businesses.
  • The Office for National Statistics (ONS) provides Death Data on the rate and cause of deaths in each NHS Trust.
  • Scientific reports from highly respected sources - Imperial College issues data together with Cambridge University and Public Health England.

Giambrone's corporate and commercial lawyers, together with the lawyers in the insurance and reinsurance team, can provide assistance to businesses by reviewing their commercial insurance policy and navigating the wording to ensure that it falls in line with the Supreme Court's judgment. The lawyers recognise that both the policies and the 150-page judgment may not seem entirely straightforward and not necessarily particularly understandable.  Assistance in establishing the validity of a policy against the Supreme Court judgment and help with negotiating with the insurer could make a significant difference to the speed and level of pay out. 

For further information about a claim against the business interruption clause in a commercial policy please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.