Insurers are already seeing a high volume of business interruption claims arising from the impact of COVID-19 and in particular following the Irish government's public health measures which are having a profound impact on some businesses. Businesses affected will be looking to their insurance policies to check if any ensuing losses are covered. Insurers will be looking to respond to these claims in a balanced and commercial manner.
DWF can assist insurers in assessing whether any business interruption claims are covered and then, if covered, in assessing their value and how best to respond to their insureds.
We set out below some issues which insurers will likely have to consider when assessing these claims.
Is the claim covered?
Business Interruption may be covered by a stand-alone policy or as part of a wider commercial combined policy. Typically it appears as an extension in property damage policies although wording varies from policy to policy.
Business Interruption cover is designed to protect the Insured from financial loss that generally follows on from an insured peril such as fire or flood damage to the Insured's property which causes disruption and consequent financial loss to their business.
Business Interruption cover extensions may also be purchased by Insureds to cover financial loss that do not flow from damage to the Insured's property. These extensions include business interruption caused by an outbreak of a disease which of course is of particular relevance in the context of COVID-19.
Insurance Industry Reaction
In a recent statement on the issue, Insurance Ireland have stated that standard commercial/SME insurance policies are unlikely to provide cover for the extraordinary preventative measures (up to and including decisions to close) that have been taken by many businesses in response to the COVID-19 outbreak.
Insurance Ireland have stated that in the small minority of cases where there is a disease extension under a business interruption policy, then an outbreak of COVID-19 at the insured's premises itself would be required to trigger cover in addition to a denial of access by public authorities. It is also worth noting that even where there is an extension covering disease, COVID-19 may well not be covered for the simple reason that it was not known about and therefore not identified in the policy.
The Regulator's Response
On 27 March 2020, the Central Bank (the "Regulator") wrote to insurers directing them to ensure that claims are appropriately assessed and where there is insurance cover in place that claims are accepted and paid promptly. The Regulator also stated that policies must be interpreted in favour of the customer where there is any ambiguity in the policy wording.
The direction relates to all insurance products and not just business interruption cover.
The Regulator further directed that the CEOs of Irish authorised firms and senior management of firms passporting in Ireland should take responsibility for the oversight of how their firm is managing determinations of whether claims are covered or not in the context of COVID-19.
It is clear that the Regulator will be monitoring the activities of firms in relation to all claims emanating from the COVID-19 emergency and early determination/investigation of claims and/or policy coverage will be necessary.
There is clearly some tension between the industry position and that of the Regulator in circumstances where the government has directed preventative measures to ensure there are no outbreaks of disease and policies typically only respond where an outbreak has occurred.
The wording of any relevant policy and clause will be of paramount importance when considering if any given claim is covered. Every business is different and each business interruption policy is specific to each Insured's requirements and/or needs. Every claim therefore will have to be dealt with on its own merits with reference to the specific policy in place.
How can we help?
DWF has a full national and international reach and the ability to service our clients' needs across the globe. We regularly assist Insurers in addressing their concerns around coverage and we have a dedicated team of our most experienced lawyers assessing the impact of COVID-19.
We can assist and advise you on relevant policy wordings and as to how you should respond to any given claim.
Should you require assistance please contact one of our team members who would be happy to assist.