Coronavirus: What do policies cover?
As we face the very real prospect of a significant increase in Coronavirus cases, the question many policyholders will be asking is: what cover do I have under my Property policy if I am affected by this?
Covid-19 is a viral disease. As such, the general view would be that it will not cause physical damage. However, this does raise the question as to what is damage? If staff on site fall ill from Covid-19, which results in the necessity to deep clean and sanitise the premises, is this not due to the infected staff virus having “damaged” the property surfaces such as handrails and door handles? There may be policy exclusions for contamination, but this is a grey area. Generally, any losses arising would be interruption to the policyholder’s business rather than material damage. What cover may there be under a Business Interruption section of a policy for such losses? There are really only two areas where some cover may be available, both being under Business Interruption cover non damage extensions.
This extension is often headed Murder, Suicide and Disease. The majority refer to cover for “interruption of or interference to the business during the period of insurance following”. They set out a list of specific notifiable diseases that are covered. Covid-19 is not normally among these, which is not surprising as it was unknown until recently. Therefore, there would be no cover under such wordings.
However, some covers are written on a non-specified basis, typically covering “loss resulting from interruption of or interference with the business during the indemnity period following any human infectious or contagious disease which is notifiable to the local authority manifested by any person whilst on the Premises”. Under this form of wording, as Covid-19 is now a notifiable disease BI losses arising as a direct result of the disease affecting the business would be covered.
Denial of Access
If we approach a worst-case scenario, it is probable that areas will be quarantined with travel being either severely restricted or cut off completely. This would have a significant impact on most businesses. Many policies contain a Denial of Access extension to the Business Interruption section. The majority typically require the denial of access to be as a result of “insured damage in the vicinity of the insured premises which prevents or hinders access to the insured premises”. As there would be no physical damage, there would be no cover under such an extension.
Some policies will contain a non-damage Denial of Access clause which typically covers losses arising from “an incident during the period of insurance which results in a denial of access or hinderance in access to the insured premises imposed by any civil or statutory authority or by order of the government or any public authority”. There is usually a geographical limit such as the incident having to be within I mile of the insured premises, plus often a time trigger such as the denial must be for more than 24 hours.
Under such a non-damage Denial of Access extension, then losses arising to the business as a direct result of such denial of access due to Covid-19 would be covered by the policy.
In summary, each policy will need to be reviewed to establish if they contain a non-specific Notifiable Disease extension and/or a non-damage Denial of Access extension.