Bira Insurance – Coronavirus facts
The Bira Insurance team have put together some facts to answer the most frequently asked questions about policy cover in relation to COVID-19
FCA Supreme Court Judgement Update from Towergate Underwriting Group Ltd
You may be aware from recent media coverage that on 15 January 2021 the Supreme Court handed down its ruling on the formal test case brought by the Financial Conduct Authority (FCA).
The case was brought to provide clarity as to whether and the extent to which insurers were obliged to indemnify relevant business interruption policyholders for financial losses incurred following interruption to their businesses resulting from the Covid-19 pandemic and the lockdown measures imposed by the UK Government.
The ruling, which is the final step in the test case process, is binding on the eight insurers involved in the test case but will also influence the way in which insurers not involved but who sell similar policies assess claims for these types of losses.
The test case considered a number of sample insurance policy wordings, comprising business interruption insurances containing what became known as “non damage” policy extensions which, in certain specified circumstances, provide cover for losses resulting from an interruption to a policyholder’s business following:
- Public authority intervention preventing access to, or use of, their business premises (Prevention of Access/Hybrid clauses); and/or
- The occurrence of a notifiable disease (Covid-19) within the vicinity or within a certain radius of their business premises (Disease clauses).
It is important to note that not all business interruption insurance policies will provide cover in respect of the Covid-19 pandemic. Most notably the majority of business insurance policies, which ordinarily require an element of “physical”” damage before cover will apply, do not.
The complex judgment ran to 112 pages. In very broad summary, the Supreme Court ruling confirmed:
Disease Clauses – the business interruption losses claimed must have been caused by the case or cases of Covid occurring within the prescribed radius, e.g. 25 miles of the insured premises (however see the finding on causation below). Additionally, each case of illness sustained by a person as a result of COVID-19 is a separate “occurrence”.
Prevention of Access/Hybrid Clauses – the relevant restrictions imposed did not have to have the force of law, it was enough for them to be clear instructions given by a competent authority, with the imminent threat of legal compulsion. While the ruling does not elaborate specifically on what would satisfy that test, instructions given by, for example, the Prime Minister would likely do so. This will have the effect of bringing the relevant policy trigger forwards earlier than the formal Regulations issued on 21 and 26 March and potentially also of bringing within scope businesses not expressly required to close by those Regulations. An inability to use/prevention of access/interruption could equally apply to a discrete part of a business, e.g. a restaurant able to continue to provide a takeaway service had an “inability to use”, “prevention of access to” or “interruption of” its discrete dine-in business.
- Causation – all instances of Covid were an “equally effective” proximate and therefore “legal” cause of the Government measures (and public response), which had been the alternate finding of the High Court. For the purposes of the disease clauses therefore, it is sufficient to show that at the time of any relevant Government measure/restriction, there was at least one case of Covid within the relevant radius specified by the policy.
- Trends clauses / Pre-Trigger Losses – only truly extraneous circumstances can be considered for the purposes of trends clauses, i.e. only non-Covid related circumstances. Further, any Covid related downturn in business prior to the triggering of the insured peril, e.g. a downturn in business prior to the imposition of the relevant restrictions, should also be disregarded for the purposes of the trends analysis: “adjustments should only be made to reflect circumstances affecting the business which are unconnected with COVID-19.”
What does this mean for you?
If you have made a claim under your business interruption policy and this has not been accepted or settled, the FCA’s expectation is that your insurer will assess your claim, or re-assess your claim if it was declined, in light of the ruling, and contact you directly.
If you have not made a claim under your policy, but believe you may be entitled to and/or are not sure if your circumstances or policy is affected by the outcome of the test case, or if you would otherwise like to discuss your claim, then please contact your usual claims contact or advisor, either of whom will be able to assist.
We would also remind you that your policy will contain obligations for you to give prompt notice to insurers of anything which may give rise to a claim on your policy, and to cooperate in the provision of information to insurers regarding your claim, and if you fail to do so any claim may be declined. Accordingly, if you do feel that you have cause to submit a claim, we would recommend that you do so as soon as possible.
How are insurers supporting unoccupied premises where businesses are temporarily closed?
- If a business has to temporarily close because of Covid-19, insurers require the Policyholder to take the appropriate steps to mitigate the risk of loss or damage to the property whilst unoccupied. The requirements of Canopius, the insurer many of our members are insured with, are listed in the panel below. Insurers are being flexible around the period of un-occupancy specified on the policy document. This is typically 30 days but many Insurers are extending this to 60 or even 90 days.
- Policies will often include conditions that are intended to ensure good practice in protecting buildings from damage caused by the risk of fire, theft and escape of water, which are often increased when a building is empty. It is important that business owners continue to follow risk management advice and ensure they understand what steps they need to take.
- Some insurers have also waived requirements for their business customers to immediately notify them of their unoccupied status, (depending on the individual business circumstances). This should help those customers concentrate on managing their businesses and allow insurers’ call centres to focus on managing the significant number of insurance claims being processed.
- If the premises are unoccupied for a prolonged period and all staff are furloughed Insurers are mindful that they cannot require a business to carry out daily checks of the premises in order to maintain insurance cover which could then prevent them from claiming the Government Coronavirus Job Retention Scheme paying 80% of staff wages, capped at £2500 as attendance at the business premises could negate the furloughed status.
During this unprecedented and uncertain time, Bira Insurance have been able to remain open by transitioning their staff to safely work from home. Phone lines will remain operational, with normal opening times. Calls may take slightly longer, but please bear with us during this busy time.
If you are insured with Bira Insurance and have any enquires not answered above, please send to email@example.com. If you would prefer Bira Insurance to call you please email and state your business name, Bira membership number and the names and mobile numbers for those authorised by you to talk to Bira Insurance about your insurance.
Risk Management Requirements for unoccupied premises+
Many Bira members are insured through Bira Insurance with Canopius. Bira Insurance asked Canopius to summarise their requirements when a property they insure is unoccupied. Other insurers will have similar requirements.
Canopius recognise the disruption being caused by the Coronavirus outbreak, and in particular the challenge being felt by our members when operating in the current restricted environment. With buildings and operations being forced to close as a response to the Coronavirus Canopius share our belief that they have the responsibility to clarify how policies will respond to unoccupied premises, as well as help insured members manage the ongoing risks to their business during this period of enforced reduced economic activity.
Temporary Vacant +
Currently within our policies we have a condition that relates to unoccupied buildings, which we will seek to maintain for current vacant premises, that became vacant prior to the Coronavirus outbreak. However, for any properties that are temporarily unoccupied as a result for the Coronavirus outbreak we are extending this period to 60 consecutive days from 24th March 2020
In consideration of the above all policy holders must apply best endeavours to implement and adhere to the risk management requirements listed below:
A) All gas, water and electricity mains supplies will be kept disconnected (except those supplies required to maintain automatic sprinkler installations, lighting or alarm systems which are to remain in operation for security or fire protection purposes)
B) All water tanks, apparatus, pipes and heating other than those connected to automatic sprinkler systems must be drained down if it is not possible when you need to maintain a central heating system, a minimum temperature of 7°C must be maintained within the property at all times.
C) All reasonable precautions are taken to ensure that the buildings are secure against entry by intruders including:
i. securely locking and fastening all doors and windows;
ii. any letter boxes being sealed;
iii. setting all security and alarm protections in full operation and ensuring that the protections are in proper working order;
D) All waste refuse and other disused combustible materials will be cleared from the building and removed from the premises
E) Tanks containing fuel or other flammable liquids must be drained and purged within
F) Where possible the buildings must be inspected at least once every 7 (seven) days by you or your nominee in order to inspect the premises both internally and externally and to carry out any work necessary to maintain the above security arrangements and a record will be kept of such inspections;
G) Notice is to be given to us when any untenanted or unoccupied building (or part thereof) is again occupied.
E) ALL OTHER combustible material should be stored at least 10 (ten) metres away from the insured premises.
Unoccupied Policies +
For polices which were already unoccupied prior to the Corona outbreak we will seek to maintain the current condition with best endeavours to be made in regards to inspections made by the client or an authorized representative to check for damage or breaches of security (if safe to do so based upon the current Government guidance in respect of travel restrictions and social distancing measures). Depending upon guidance issued by the Government, a drive past inspection may still be allowed and if this is the best that can be achieved then that should be done and recorded.
The inspection should be completed by a competent person to ensure no deterioration in the controls in place or fabric of the building including any external signs of trespass or anti-social behaviour e.g. graffiti. Inspections should be recorded, retained, and signed by the responsible person to evidence that they are being completed. This is critical in terms of evidencing inspections have been taking place in the event of a claim. If due to increasing travel restrictions and/or following a risk based assessment of the ability to comply with the social distancing measures in force, it is deemed unsafe to request employees to travel to premises, then where external/internal CCTV is present and can be remotely monitored this will be considered an acceptable alternative to physical inspections. However, records of viewing the remote feeds should be made and any concerns followed up with Canopius. Any defects in security or condition must be remedied as a matter of priority. Where a premise might normally benefit from manned security presence and this has been removed due to restrictions imposed by Government then Canopius should be informed such that alternative provisions can be agreed between the parties.
The above information contained is based on sources that we believe are reliable and should be understood as general risk management and insurance information only. It is not, and is not intended to be taken as, legal advice and/or advice with respect to any specific or individual situation and cannot be relied upon as such.
Bira Insurance is designed and delivered by Towergate Insurance – the leading independently owned insurance intermediary in the country. Bira Insurance, Towergate and Towergate Insurance are trading names of Towergate Underwriting Group Ltd. Registered Address:2 Minster Court, Mincing Lane, London, EC3R 7PD, United Kingdom. Registered in England with company number 4043759. Authorised and regulated by the Financial Conduct Authority.