COVID-19 and the Role of Insurance: Emerging Issues for your Business

The outbreak of the Corona Virus (COVID-19) pandemic has had a devastating economic effect on several businesses. Although businesses may have continuity and contingency plans in place, those plans may generally not protect the business from some losses occasioned by travel and movement restrictions and disruptions to the supply chain.

There is no gainsaying the fact that the pandemic will affect sectors in different ways, however, it is envisaged that affected businesses in the various sectors would have similar enquiries as to the role of insurers and insurance in mitigating their business losses.

Insurance companies offer a range of business interruption policies to protect a business upon occurrence of an agreed disastrous or catastrophic event. During the occurrence of this event, business operations might be put on hold resulting in a loss of income. Business interruption coverage generally allows a business to recover certain losses in the event that the business suffers physical damage or loss that prevents it from carrying out its operations by covering for actual or potential loss of earnings and additional expenses incurred as a result of material loss during this period.

The question as to whether a company would be able to claim insurance cover for business interruption due to the pandemic would depend on the wording and the terms of the policy. Insurance policies are contracts between the insurer and the insured and, like any other contract, would be interpreted by the courts in light of the parties’ clear intentions as conveyed by the language (wordings) of the policy.

Where the policy expressly excludes the outbreak of communicable diseases, pandemics and/or epidemics, it is unlikely that the courts will enforce an insurance claim for business interruption due to COVID-19 outbreak. Interestingly, a recent claim filed against an insurance company in the United Kingdom, revealed that the policy expressly covered business interruption occasioned by restrictions from a public authority following an occurrence of a notifiable human disease.

Flowing from the above, the position on whether or not a business would be able to claim insurance under a business interruption policy would depend on the terms of the policy. Thus, business owners should begin to review their insurance policies to determine if they have coverage for loss occasioned by COVID-19.

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