Business interruption insurance is an important tool for businesses which can enable them to avoid, or at least mitigate, a potentially destructive loss of revenue due to circumstances beyond their control. Even where a business does not have a specific policy, coverage may be provided through other policies, for example a buildings insurance policy.

Business interruption insurance - purpose

The purpose of business interruption insurance is to cover businesses for financial losses caused by a named peril preventing them from operating, such as a flood or a fire. Such a policy may also provide cover for losses arising due to the consequences of an infectious disease or a pandemic such as COVID-19. The type of financial loss covered by a policy will depend on its wording, but will commonly include loss of revenue, loss of rental income and overheads (for example, staff costs).

Impact of current lockdown - insurers' response

A business interruption policy can therefore be a lifeline to a business affected by COVID-19. However, following the Government's temporary closure of businesses as part of the response to combat COVID-19, there already have been a number of issues caused by insurers seeking to avoid coverage under business interruption policies.

Even where the wording of a policy appears to cover losses arising from such closures, it will be important to review and understand the policy in its entirety. The policy may include separate clauses which exclude or otherwise limit coverage.

Businesses need to be prepared for the possibility that insurers will challenge and (in some instances) reject their claims. Businesses will also need to be generally mindful of their reporting obligations in order to avoid insurers rejecting claims because they were not notified in time or at all.

If your insurer won't pay up...

If an insurer challenges or rejects a claim under a business interruption policy, then a thorough understanding of the policy can help a business to persuade or otherwise compel the insurer to accept the claim.

Our dedicated team of dispute resolution lawyers has significant experience in successfully assisting businesses in dispute and would be happy to discuss issues arising from business interruption policy coverage.