Posted on: 20 March 2020
International law firm HFW has issued a briefing focusing on Business Interruption issues with regards to COVID-19.
As COVID-19’s grip across the globe continues to tighten, we have already seen business interruption coverage proceedings commenced in Louisiana this week following the closure of a fish restaurant due to COVID-19 virus contamination. Insurers are busy considering initial claims and their books generally in relation to their exposure. What is certain is that significant financial losses will be suffered and people will consider whether these are (or ought to have been) insured.
As businesses work hard to keep their operations running across the world in the face of the logistical challenges posed by COVID-19, we have been talking to clients in the different jurisdictions in which we work about the insurance cover available in light of the effect on their businesses. What is especially challenging is the “new” nature of this pandemic, in that the virus is so contagious for such a long time, in many cases with no symptoms, as well as the fact that relatively little is known about it. Similar to, say, nuclear contamination, the virus can exist invisibly on surfaces, but while there is no conclusive view as yet, it apparently does not survive on some materials for long. Some report suggest that, depending on the material, the virus can survive for 4-7 days. This issue will also probably be with us for many months, until a vaccine is available or until the virus peters out. In this briefing we look at how policies might respond to business interruption claims in these circumstances and the different issues that might arise. We have included comments from various jurisdictions where we have HFW offices, all of which have been dealing with these issues.
Property Damage and Business Interruption
Many insurers will have provided cover to policyholders for business interruption alongside their property damage cover. After suffering an insured loss, a policyholder can make a property damage claim to ensure that its property is repaired, and a business interruption claim to cover the loss arising from the disruption in its business operations caused by the same incident.
In order to assess whether cover is available, it will be necessary to consider carefully both the wording of the policy, and the nature of the damage and circumstances of the interruption.
With COVID-19, there seem to be two sets of circumstances that lead to an interruption in business operations. The first is a case or suspected case of COVID-19 on the business premises. Here, the governmental advice is to talk to the health authorities and take the steps they advise; usually involving deep-cleaning the premises and isolating staff. Now, of course, in many countries anyone who is able to do so has been advised to work from home.
The second set of circumstances is where a business is advised or ordered to stop operations by a governmental authority, in order to stop or slow down the spread of the virus.
There are a number of difficulties with the concept of business interruption flowing from property damage in relation to COVID-19, and we examine these below.