With instances of COVID-19 rapidly increasing throughout the UK, many businesses are considering the potential impact on their businesses if they are forced to temporarily close as a result of the outbreak.
Please note: the information contained in this legal update is correct as of the original date of publication
With instances of COVID-19 rapidly increasing throughout the UK, many businesses are considering the potential impact on their businesses if they are forced to temporarily close (or if a precautionary decision is taken to do so) as a result of the outbreak. This bulletin provides a brief overview of the key factors when considering whether any such closure is likely to be covered under conventional business interruption policies.
Most businesses will have the benefit of business interruption cover, which generally covers loss of gross profit or loss of income in the event the business is interrupted or adversely affected due to reasons beyond the policyholder’s control. Conventional business interruption cover is subject to a ‘material damage proviso’, namely that in order for an interruption to be covered it must be caused by physical damage that is insured under the policyholder’s property damage policy (e.g. interruptions caused by fire or flood). However, many policies also include cover for interruptions caused by other factors. Depending upon the specific cover under the policy, interruptions caused by COVID-19 may in some cases be covered under a business interruption policy, subject to the considerations shown below.
Most policies contain cover for interruptions caused by restrictions imposed by public authorities. Usually, public authority closure cover is limited to specific causes, which often include the outbreak of a disease. However, different policies deal with this in different ways. Cover may be subject to one or both of the following:
Many businesses are considering a temporary closure as a precaution against the further spread of COVID-19. Whilst that might be a sensible precaution to take, most business interruption policies will not cover losses arising from a precautionary closure or from a closure arising from the fear or threat of a disease. In most cases, an order to close from a public authority is a pre-condition for coverage under the policy. Equally, a decision to require individuals who may have been exposed to COVID-19 to self-isolate will not be covered by most policies.
Where a business interruption policy does respond, it is important to note that it will usually be subject to a time excess or franchise period, which is very often a set number of hours or days. Where the policy is subject to a time excess, no cover will be in place for any losses suffered during the period of the excess. Where this is expressed as a franchise period, the full loss will be covered, subject to the interruption lasting longer than the franchise period.
It is important to remember that, as with all insurance policies, the policyholder is under a duty to minimise its loss. The steps that can be taken will be specific to each business, but by way of example, could include:
This bulletin is intended to provide general guidance only. It is important to check your specific policy for its terms and conditions. If you are unclear as to whether your particular policy responds, you should speak to your insurance broker in the first instance.
Partner
tim.johnson@brownejacobson.com
+44 (0)115 976 6557
With the fast pace of legal and regulatory changes, Browne Jacobson is launching its ‘In-house for intermediaries’ service for brokers and MGAs.
This webinar looks at the three key themes in the decision, and is aimed at sports & social clubs (including safeguarding officers).
A recent Court of Appeal judgment has provided some useful and much-needed clarity on the interpretation and application of aggregation clauses in insurance contracts.
Browne Jacobson’s national corporate tech lawyers have advised specialist insurtech business Laka on its $12m series A investment round. The cash injection will allow Laka to expand its operations across Europe and support its new retail partners based in Belgium, France and Germany.
Catch up with our Broker Insight on-demand video. With many intermediaries looking to buy, sell or seek external investment, we explored the elements of a successful M&A transaction.
Ahead of COP 26 in November, Browne Jacobson LLP is producing a series of articles to help insurance market – and other financial services – firms manage the compliance risks they face in relation to climate change with this article addressing issues around transition risks.
The forced closure of many businesses as a result of the Coronavirus pandemic has had a huge impact on the nation’s Gross Domestic Product (GDP). Recent reports from the Office for National Statistics state that the economy was 25% smaller in April than it was in February this year.
We’ve already discussed various practical implications that COVID-19 is having on M&A transactions, but if transactions are continuing to go ahead, what are some of the legal considerations to bear in mind in the current climate?
With instances of COVID-19 rapidly increasing throughout the UK, many businesses are considering the options available to limit staff and customer exposure to Coronavirus.
With instances of COVID-19 rapidly increasing throughout the UK, many businesses are considering the potential impact on their businesses if they are forced to temporarily close as a result of the outbreak.
Read our latest insurance newsletter for our clients and contacts across the financial services market with quarterly updates and insights on topical legal and regulatory issues.
Welcome to our review of 2019 as we look ahead to what is on the horizon for the insurance sector in 2020.
On 19 November 2019, the Financial Conduct Authority (“FCA”) published “Finalised guidance” (FG19/5) for “insurance product manufacturers and distributors”.
The Financial Services Duty of Care Bill (the “Bill”) was introduced into the House of Lords in October 2019 and had its second reading on 9 January 2020.
The latest update covering delegated authority, insurance product development, the senior insurance managers regime, data protection, operational control frameworks, Lloyds market, and horizon scanning.
Lloyd’s has announced changes to its rules on delegated authority (DA) business, aiming to embrace technology and a more risk-based approach.
On 16 July 2019 the Serious Fraud Office released details of the Deferred Prosecution Agreement reached with Sarclad Ltd in July 2016.
Companies should undertake a comprehensive review and audit to identify those products and legacy contracts that are LIBOR-linked and carry out an in-depth risk assessment of discontinuation. Where possible, companies should look at appointing an individual to oversee the programme.
Sometimes it can feel as though there is no such thing as an accident anymore…
The UK Financial Conduct Authority (FCA) has published the final report (PDF) on its market study of the London wholesale insurance broking market.