In a follow up article to his previous business interruption analysis, specialist insurance barrister, Graham Bartlett examines specified illness and public emergency cover in the context of the Coronavirus crisis:
Specified illness and Public emergency cover
It is unlikely that business interruption policies will cover the closure of a business where the cover is conditional upon there having been damage to the premises caused by an insured peril and that there is insurance cover in place for that damage (the material damage proviso).
There are, however, extensions to the basic cover which may, depending on how the cover is defined, provide cover for businesses affected by the response to the Cornonavirus.
Specified illness cover
Some policies provide additional cover for loss caused by the outbreak of a specified disease either at the premises or in its vicinity. The policy will give an exhaustive list of the specified diseases. A typical list includes acute encephalitis, acute poliomyelitis, anthrax, chickenpox, cholera, diphtheria, dysentery, leprosy, leptospirosis, malaria, measles, meningococcal infection, mumps, opthalmia neonatorum, paratyphoid fever, plague, rabies, rubella, scarlet fever, smallpox, tetanus, tuberculosis, typhoid fever, viral hepatitis, whooping cough and yellow fever. Unfortunately, however, as Coronavirus and Covid19 are new they are unlikely to feature in any list of specified illnesses.
Public Emergency/Government or Local Authority action cover
An extension to the basis cover which may respond to the present circumstances is cover for loss resulting from the actions or advice of the government or local authority.
One example of such cover insures loss resulting from prevention of access to the premises due to the actions or advice of a government or local authority due to an emergency which is likely to endanger life or property. The government ordered the closure of restaurants, cafes, bars and public houses for the consumption of food and/or drink on the premises, although they were permitted to open access for the sale of food and/or drink for consumption off the premises. The question that may then arise is whether access to these premises, by being denied to a certain category of customer, was prevented within the meaning of the policy.
Another example of public emergency cover insures loss resulting from the actions or advice of a government or local authority due to an emergency likely to endanger life or property in the vicinity of the premises which prevents or hinders the use of or access to the premises. The scope of this cover is rather wider than the first example as it covers circumstances where the use of the premises is hindered even if access is not actually prevented..
Calculation of the loss
Nearly all businesses which involve some element of public access have now been ordered to close (the exception being those on the list of businesses supplying essential services) and restrictions placed on personal movement. Even if the businesses had not been ordered to close and had remained open, they could only have been visited by members of the public acting unlawfully in breach of the order only to leave home for exercise, or for shopping for essential items, for medical and caring needs and for travel to work where working from home is not possible. The loss of business could be argued to be as much due to the restrictions on the general movement of the public as to the actual closure of the business.
Adjustment of Standard Turnover
Business interruption policies allow for adjustments to be made to the standard turnover (the turnover during the interruption period in the previous financial year and which is used for comparison with the turnover during the interruption period in the calculation of the loss) to reflect the trend in the business and the influence of other uninsured effects on turnover. The adjusted standard turnover is the turnover that the business would have achieved but for the insured event. The impact of the Coronavirus crisis on the general level of economic activity is bound to have had an effect even if businesses had remained open.
Scrutiny of business interruption policies and expert advice would seem to be essential prerequisites to the submission of a business interruption claim.
Following his previous career as a Chartered Loss Adjuster, Graham advises extensively on insurance disputes, including in relation to breaches of warranty and utmost good faith. Graham has dealt with a number of building and construction disputes involving damage to both residential and commercial property. He has also been instructed in relation to claims under the insurance clauses in the JCT Standard Form of Building Contract and on Contractors All Risks insurance policies.
Graham regularly writes articles for The Journal, the Chartered Insurance Institute's leading insurance industry publication. Graham also writes a specialist Blog dedicated to legal developments and analysis of the ever evolving insurance industry.
In response to the escalating coronavirus crisis, Graham, other barristers in Chambers and staff are committed to providing as much assistance as possible, including urgent advice, online resources and other support, during these challenging and unprecedented times, as such Trinity have a dedicated section of the website focused on COVID-19.