Various reports have emerged in recent days on difficulties with business interruption insurance. What is happening is that businesses affected by the Coronavirus (Covid-19) crisis who expect an insurance payment are finding that they may not be covered by their business interruption insurance policies. John Whelan takes a look at the issues involved.

In the last few days, many businesses across Ireland have had to close their doors due to the Covid-19 pandemic. Controversy has arisen as to whether these businesses are covered for loss of income under their business interruption insurance policies.

Businesses who have "business interruption" cover in their insurance policies and are impacted by the outbreak understandably think they can justifiably make a claim now. However, there have been a number of complaints from businesses, especially in the restaurant, pub and hospitality trade, whose insurers are refusing to pay out.

What is business interruption insurance?

The purpose of business interruption insurance is to protect businesses against loss of income in the event of that they are unable to carry on business as usual due to an unexpected event or disaster. Depending on the policy, loss of income from events such as notifiable diseases may be covered, sometimes by way of an optional extension to the policy.

Does business interruption insurance cover businesses for the impact of Covid-19?

It appears that some businesses who have had to close due to the Cover-19 pandemic are finding it difficult to claim on their business interruption insurance policies.

A press release issued by Insurance Ireland (20 March, 2020) stated that business interruption insurance policies are “unlikely to provide cover for the extraordinary preventative measures (up to and including decisions to close) that have been taken by many businesses to implement social distancing guidelines to mitigate the spread of Covid-19.” The statement went on to say, “In the small minority of cases where there is a disease extension under a business interruption policy an outbreak of Covid-19 at the premises itself is generally required to trigger cover as well as a denial of access by public authorities.”

According to a report in The Irish Times (23 March, 2020) “Minister for Finance Paschal Donohoe has called on insurers not to reject businesses’ claims for loss of earnings if they were advised by the Government to close to contain the spread of Covid-19.”

Elsewhere, RTE’s business editor Will Goodbody has reported (27 March, 2020) that where there is ambiguity in the interpretation of the contracts of customers who are making claims arising out of the COVID-19 disruption, the Central Bank wants insurance companies to find in favour of the consumer.

At the time of writing, it is unclear how the issues arising in the current business interruption insurance controversy will evolve, not least in light of the further actions to control the Covid-19 crisis announced by Taoiseach Leo Varadkar on 27 March 2020.

Much is likely to come down to the detail and exclusions set out in individual business interruption insurance policies.  Businesses who have not already done so, should therefore check the detail of their business interruption insurance policies carefully. As with most products and services, all insurance policies and insurance companies are not the same.

What should I do if my insurance company says it won’t pay?

At the time of writing, we understand that the Central Bank is to write to the insurance industry outlining how it expects them to handle the settlement of claims arising from Covid-19.

Contact us if you would like some assistance with this matter.