If you are a business owner and have business interruption insurance, you will no doubt have questions on how you are protected from the impact of COVID-19 on your business.
What should you first do?
Any business that has been forced to close, should carefully examine their insurance cover to see if they have for business interruption.
Each case is different and so the question of whether or not the policy affords cover may be different in each case. Cover is determined by your circumstances and the terms and conditions set out in the policy documents.
Many businesses are surprised to discover that their commercial property insurance policies are refusing to respond to claims for loss of income, continuing operating expenses, rent, payroll and stock.
Since the emerging of this crisis; we, at Lynch Solicitors, have come across a broad range of justifications that Insurers are giving as a reason to refuse cover.
The arguments for not agreeing to cover business interruption can include:
- The business interruption policies only covers loss of income due to physical damage caused by a named peril such as fire or rodent infestation.
- Where there is a disease extension under a business interruption policy, an outbreak of Covid-19 at the premises itself or within 2km is required to trigger cover. They also look for a denial of access by public authorities. This may mean that a business will not be covered unless a member of staff contracted the virus and the authorities forced the closure of the premises as a result.
- That the list of notifiable diseases is only those specifically listed in the policy; or
- That where COVID-19 was not anticipated, business interruption simply does not apply.
- That the pandemic itself is a “force majeure” event.
It is not unexpected that Insurers will attempt to resist claims. However, resisting claims is not the same thing as liability for claims.
In many cases, it is the expected first reaction of the Insurer which needs to be checked out.
The Golden rule is that any ambiguity should be resolved in favour of the Insured.
Central Bank & Business Interruption Insurers
Insurers have been taking a firm stance on business interruption insurance cover, on the extent to which businesses can expect to be indemnified for their losses from COVID-19.
This has resulted in an intervention by the Central Bank following numerous complaints from Business owners.
The Central Bank has now informed Insurance chief executives in the State they must take personal responsibility for the oversight of how claims relating to Covid-19 are handled by their firms.
They have been directed Insurers to interpret policies in favour of customers where there is doubt.
The Central Bank stated in a recent letter to various Insurance Companies:
“Although the Central Bank expects that most policy wordings are clear in terms of what cover is provided and what cover exclusions are in place, where there is a doubt about the meaning of a term, the interpretation most favourable to their customer should prevail.”
Both the Department of Finance and the Central Bank have indicated that as a general rule insurer should not attempt to reject claims on the basis of interpreting policies to their own advantage.
Most importantly , the Minister for Finance has said that where a policy states that a claim can be made when a business has closed as a result of a Government direction, that a claim should be dealt with in accordance with the policy .
This is in the context of a term in these policies that provided cover for a general notifiable infectious disease, Government advice to close a business amounts to the same thing.
Both the Department of Finance and Central Bank have now stated that Government guidelines and direction on Covid-19 amount to the same thing and provides cover if the policy covers claims for notifiable infectious diseases.
This is, of course , also consistent with the rules of interpretation applied by our Courts .
Direction to Childcare Providers and Pubs to close
We take the view that the Government’s direction to childcare providers and pubs and clubs to close, should be sufficient for those businesses to claim on their policy of insurance where the appropriate business interruption cover is in place.
Duration of Business Closure
Another issue for many business owners is the indefinite duration of the business closure period.
Even where business interruption insurance cover is in order, the policy extension might be limited in duration and the interpretation of duration clauses may well give rise to dispute between insurers and policyholders.
The policy needs to be carefully read with any ambiguities in favour of the policy holder.
Advice on Policy Terms
Policyholders need to check their policies very closely and engage with their Insurers or Brokers to establish whether their business interruption cover applies in the present circumstances of the outbreak of COVID-19.
How can we help?
If there is a dispute on the conditions required to secure business interruption indemnity, legal action may be required to compel performance of the contract of insurance or compensate businesses, once the cost of the COVID-19 disruption is ultimately measured.
The first step is to review the policy and apply the legal principle of Insurance Law and interpretation.
Discussion by your lawyers with the Insurers may resolve the issues .
If not, many insurance policies specifically mandate that disputes are to be dealt with through the Arbitration mechanism.
Arbitration is quite a complex area of law that requires detailed examination and preparation.
Our Litigation and Arbitration team are ready to assist any Businesses seeking a review and advise on the terms of their business interruption policy and seeking to enforce the terms of their business interruption policy.
Stay Safe .