Covid-19 - Insurance issues for businesses
Covid-19, and the government’s response to Covid-19, has caused severe disruption to businesses and their staff. As people may have already discovered, there are limits to the response of insurance policies to losses caused by pandemics. This article looks at some of the insurance issues that may arise for businesses and their staff as a result of the lockdown and the response to Covid-19.
Will my business interruption policy cover my business for losses suffered in relation to Covid-19?
One of the first questions that most businesses think of in a situation like this is: does the business have cover under its business interruption policy for businesses losses arising from this pandemic? Business interruption policies are generally linked with cover under the associated material damage policy. Therefore, usually in order to trigger cover under the business interruption policy, there needs to be damage to the property insured by the material damage policy. In the case of losses solely resulting from the economic consequences of the response to Covid-19, that would not be the case.
Some business interruption policies do have an extension which responds to the closure of a business by an authority. You would need to check your particular policy to see if it had such an extension and the scope of the extension (for example how is the extension worded and would it cover this particular situation?). Unfortunately most of those policies will also contain an exclusion relating to losses caused by human or animal diseases (or similar wording). Therefore, the economic impact resulting to businesses from the response to Covid-19 will often not be covered. However, it is important for you to check your own policy wording as every policy is different.
What about my business insurance cover for buildings and assets?
If businesses have regulatory requirements to fulfil, for example to check their buildings or assets, that may also be a condition of their policy, and that cannot be carried out as a result of the lockdown or self-isolation, make sure you speak with your insurer or your broker to ensure you are not going to breach one of the conditions of your policy if you do have to subsequently make a claim.
My business is in the construction industry and we have had to vacate construction sites during the lockdown – what will this mean for our contract works insurance?
Another issue that may arise for those in the construction industry is “cessation clauses” in contract works policies. A number of contract works policies have these clauses that effectively invalidates cover if work stops for a certain period of time (each policy will be different in terms of this timeframe). It is important for businesses that are undertaking building work to check the particular terms of their contract works policy and speak to their insurer/broker about whether the insurer will agree to extend this period or reach agreement on cover continuing.
I am working from home – will this have any impact on my home insurance policy?
Most businesses that are still operating now have staff working from home. It is important for staff who are working from home to check to make sure that their home insurance policy, or some part of cover under that insurance, does not have any exclusion that would result in cover not being available as a result of that work being carried out at home. Provided the work in question is office based in nature, it should be covered by most policies. However, not all working from home situations may be covered, so it is important that you and your staff check their policies and, if necessary, contact the insurer.
What if I can’t get home and my house is currently unoccupied?
Most home policies are automatically suspended if no one has been living in the home for a set period of time (often between 30 and 60 consecutive days). If you are stuck overseas or if you are staying somewhere else for the lockdown (or staying at your business premises) and your house is vacated as a result, you should make sure that you contact your insurer to try and arrange for cover to continue after this period expires.
I have travel insurance – surely that will cover me?
As some of you may have discovered, most travel insurance policies have exclusions for things like outbreaks of pandemics. There are usually exclusions for known events. Again, all policies are different and therefore it is essential for you to get advice on what your policy does and does not cover. With uncertainty over how long these issues will last and the ongoing impact of border closures and government responses to the outbreak, it will also be important in the upcoming months and years to check the extent of your cover if you are travelling (whether domestically or internationally, when that becomes an option), particularly while a vaccine for Covid-19 is still being developed. Your cover and any limitations on that cover should be clarified before you book your travel.
This article is a general overview of some insurance issues that may arise during this period of uncertainty. It is important to make sure you understand what insurance cover you do have, and any limitations of that cover. If you have any questions or concerns about your insurance cover you should contact your insurer or broker in the first instance.
The above information is of a general nature only. The information contained in this document does in no way constitute legal advice and all readers should contact a law firm for advice relating to your specific circumstances.
About Melissa Borcoski
Melissa is a member of our Litigation Team and specialises in commercial and civil litigation. She has specialist expertise in insurance law having acted for both insurers and policyholders throughout her career.
About Tyler Brown
Tyler is a partner in our Litigation Team, focusing on commercial and civil litigation matters. He also has specialist knowledge in insurance law and has significant experience in dealing with insurance claims arising out of the Christchurch earthquakes.