• rradar

The coronavirus - how will it affect commercial insurance?



The coronavirus outbreak has become a significant international issue, disrupting travel and businesses worldwide. How will it affect commercial insurance policies and what should businesses know? rradar solicitor David Richardson examines the implications.


As the coronavirus infection (COVID-19) continues to spread across the globe and the World Health Organisation declares the coronavirus a global health emergency, many businesses and organisations are reaching for their insurance policies and speaking with their brokers to see what cover they have in place, if any. The personal insurance products will see a spike in claims with individuals claiming under their Travel, Health and Life/Critical Illness policies. Commercial insurance policies are also likely to feel the effect of the coronavirus with businesses looking to their polices to cover any financial effect of the infection.


The UK government has now classified the coronavirus as a “notifiable disease” in England and Wales, which is a requirement within insurance policies to attract cover. Scotland and Northern Ireland adopted the classification in February.


The Department of Health and Social Care said:


"We want to ensure any steps taken to protect the public during the COVID-19 outbreak are proportionate and do not come at an unnecessary social or economic cost.


"To mitigate the effect on businesses, we will register COVID-19 as a notifiable disease. This will help companies seek compensation through their insurance policies in the event of any cancellations they may have to make as a result of the spread of the virus."


However, the Association of British Insurers has said that the government’s decision is unlikely to apply retrospectively, and that some standard commercial insurance policies may not cover such a novel phenomenon.


It is worth noting that some policies may also contain specific exclusions for epidemics and pandemics, with others having strict limits on the possible covers that could respond.


Businesses considering making an insurance claim should also be aware that the terms of the policy will compel them to mitigate their losses where reasonably practicable and to act as a “prudent” Insured.


Best practice is to check the specific wording of your insurance policy and seek guidance from your insurance broker and/or insurer.


The potential business disruptions from the outbreak should not be underestimated. It is advisable for businesses to consider what effect the outbreak could have on the business and to put reasonable and proportionate measures in place. Included in this preparation should be clarification on what insurance cover, if any, they have and any conditions with which they must comply to attract cover.


Practical considerations could include:


  • Keeping up to date with the affected areas and spread of the outbreak.

  • Checking Government and Industry advice.

  • Reviewing Health & Safety policies, especially relating to virus and disease control and ensuring they are up-to-date and appropriate.

  • Updating and/or undertaking requisite risk assessments.

  • Checking relevant contracts/agreements to ascertain the potential effects of the outbreak.

  • Carefully drafting any new contracts/agreement to include a “force majeure” clause.

  • Considering Insurance agreements, as mentioned above.

  • Provide the workforce with information on the outbreak including where and how it spreads along with how to prevent it spreading.


Please see below some useful links for further information & guidance from the UK Government:


https://www.gov.uk/guidance/coronavirus-covid-19-information-for-the-public

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19