You should carefully consider your insurance policies to determine which of them may help to recover loss sustained. This might include the cost of cancelled travel or corporate events or any extra costs of working where staff have been told not to come into the workplace for prolonged periods.
REMEMBER: Whether or not your insurance policies will cover COVID-19-related losses will obviously depend on what the policy includes or excludes.1 Make sure you speak to your insurance broker about the cover you have in place and how it might be called on right now to help with any issues you are experiencing.
Looking forward, you might wish to consider purchasing extensions to cover, if available, to assist in dealing with the significant financial losses caused by contagious diseases such as COVID-19.
Event cancellation insurance typically responds to events beyond your control but many event cancellation policies exclude cover for communicable disease/pandemics.2
Even where a policy could potentially apply, questions could arise where an event not initially postponed or cancelled after a "Notifiable disease" or pandemic was declared was later cancelled or postponed.
REMEMBER: You should consider postponing events with notice to your customers rather than cancelling events outright. The policy may respond where an official body (such as a government or local authority) has determined that the event should not go ahead.
The aim of business interruption (BI) cover is to restore the policyholder to the position they were in before the event occurred in terms of lost profits or additional expenditure. There may be cover where your supply chains have been disrupted or you have been denied access to your premises by government order and, depending on the extensions to cover available, even a loss of use of premises due to virus contamination.
It is common for a BI policy to generally include a requirement that insured "property" has sustained damage.3 The damage must occur while the policy is current, and the loss (of profits for example) suffered while the insurance policy responds.
However, some policies can give extra cover under a "Notifiable" or communicable disease extension. Some policies offer "denial of access" cover which normally requires a mandatory closure of premises by legislation or government order as a result of defined disease.
Contingent Business Interruption (CBI) policies may provide cover where a key customer or supplier is forced to close. In some instances, non-physical damage-based CBI policies may be available to respond to a reduction in supply that leads to a loss of output.4
Trade credit insurance
If you have purchased trade credit insurance (sometimes referred to as debtor insurance) you may be able to recover revenue lost where customers have not paid their invoices because of cash flow problems or insolvency. Trade credit coverage can be bought to cover single customers or the entire customer base.
In many instances, policies will cover the costs of cancellation of flights, hotels or other travel tickets in the event that a government authority has advised against travel after the trip was purchased. However, policies are highly unlikely to cover cancellation of travel booked after you are aware of official advice not to travel.
Policies will not respond where you cancel if you decide not to travel rather than responding to official advice.
Policies may respond to claims against professionals for negligence where disruption caused by COVID-19 results in errors or omissions. There may also be liability where professionals fail to take adequate steps to prevent the spread of the virus to their clients or colleagues.
Directors and officers liability
Directors and officers in your organisation may need to consider their reporting and disclosure obligations in fast changing and often confusing circumstances. Boards should be alert about the impact of supply chain disruption on their solvency and mindful of their obligations under health and safety and employment laws. Business continuity plans will need to be applied and reviewed on a regular basis as the situation changes.
As your employees may be required to work from home, you should be alive to possible vulnerabilities in your corporate IT data security systems. Policies will differ in terms of the scope of coverage and supporting assistance in the event of a cyber attack.
1 Wordings and coverage differ depending on
the type of policy, the risk appetite of the insurance company
issuing it and the risk management decisions made when purchasing
it. Naturally, risk management extends to mitigation of loss and it
is worth bearing in mind that all coronavirus-related claims will
involve an assessment of what steps have been taken to mitigate
2 Recently, one leading Lloyd's market insurer commented that less than 10 per cent of their event cancellation policy buyers had elected to purchase disease/pandemic extensions to cover.
3 Typically, such damage arises from events such as fire, storm or flood.
4 Although not common in the market, one can readily imagine the value of such cover in current circumstances.
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.