On 5 March 2020, the UK’s Department of Health and Social Care issued a notice that Covid-19 was included in the list of notifiable diseases and SARS-COV-2 in the list of notifiable causative agents, by adding them to the Health Protection (Notification) Regulations 2010. As a result, GPs are now required by law to report all cases of Covid-19 to Public Health England.
In anticipation of this listing, the Association of British Insurers (the ABI), issued on 4 March 2020 a statement entitled ‘ABI comment on Coronavirus and commercial insurance’, commenting that:
“….A small number of businesses may have cover in place that will specifically provide for business interruption arising from notifiable diseases. However, this type of extension is not commonly included as standard. Standard business insurance policies are designed and priced to cover standard risks and are therefore unlikely to provide cover for the effects of global pandemics like Covid-19."
This commentary was reiterated in a subsequent statement, entitled ‘Coronavirus: Business Insurance - further guidance from the ABI’, issued on 18 March 2020, expressing that:
“…Only a very small minority of businesses choose to buy any form of cover that includes local closure due to an infectious disease.
An even smaller number will have cover enabling them to potentially claim on their insurance for the presence or impact of the Coronavirus pandemic….”
This cautionary commentary from the ABI is an attempt to manage policyholders’ expectations in relation to potential insurance coverage for business interruption losses due to Covid-19.
In most business interruption policies, human infection with Covid-19 will not be covered as it does not constitute ‘physical damage’ - which is the triggering requirement for coverage.
Non-damage extensions of coverage for business interruption losses due to ‘infectious diseases’ are not common. More often, there may be coverage extensions for certain expressly identified diseases which are linked to exclusions for ‘any other’ – not expressly identified - contagious disease.
The identified and covered diseases are usually those which have been previously listed as ‘notifiable diseases’ under the Health Protection (Notification) Regulations 2010. These did not in the past include Covid-19. As a result, despite the recent listing of the illness as a notifiable disease, Covid-19 may still be caught by the exclusion of ‘any other’ contagious disease, which comprises those diseases not expressly identified in the policy extension.
Other extensions which may apply to the Covid-19 outbreak relate to the ‘denial of access’ to business premises due to public authority actions. However, the language used in the terms of these extensions vary greatly.
Most ‘denial of access’ extensions are ‘non-damage’ extensions. They usually do not include the triggering requirement for coverage of ‘physical damage’ to insured premises. Often, these extensions contain some ‘deeming’ language which specify that any ‘denial of access’ type of event or circumstance is ‘deemed’ to be covered as ‘physical damage’ to property.
However, a few policies expressly require that there must be actual ‘physical damage’ to property for the extension to apply. This category could only provide coverage for infection of Covid-19 if it results in some significant ‘loss of use’ of the premises that is tantamount to ‘physical damage’. This is a high threshold to satisfy. In addition, there may be a specific exclusion of ‘loss of use’ in the policy terms.
A few ‘denial of access’ extensions are broader, by including not only an ‘order’ or ‘action’ by a public authority but also any ‘advice’ from a public authority, as the trigger for coverage.
These types of extension may also be labelled as ‘civil authority’, ‘public emergency’ or ‘public order’ extensions, which may not even expressly refer to ‘denial of access.’ However, even these extensions usually require that the public authority ‘order’, ‘action’ or ‘advice’, in fact, ‘prevents or hinders’ any ‘access to’, or more broadly, the ‘use of’ the insured premises.
It may be more difficult for a policyholder to show a causal link in the following of advice from a public authority which then allegedly causes a ‘prevention’ or ‘hindrance’ to ‘access of’ the premises, as opposed to a ‘hindrance’ to the ‘use of’ these premises. It may be easier to prove that following government advice has caused low staffing levels which, in turn, has hindered the ‘use of’ the business premises, whilst in theory there has been no physical ‘prevention’ of ‘access to’ the premises.
For instance, implementing an internal employment policy which requires employees who show signs of infection to self-isolate may result in the shutting down of the policyholder’s business activities in the premises, which may be characterised as a ‘hindrance’ to the ‘use of’ the premises.
However, the courts may adopt a restrictive interpretation of ‘prevention’ or ‘hindrance’. It may be necessary, for example, to prove that an employee tested positive whilst on the premises, resulting in an order of closure by a public authority. It may also be required to prove that the supply chain has collapsed due to a public authority order relating to the outbreak of Covid-19.
The scope of coverage relating to ‘denial of access’, ‘public emergency’, ‘notifiable disease’ and other extensions will have to be examined carefully on a case-by-case basis due to the lack of uniformity and the great variety of specific policy terms.