Businesses may have some insurance to cover losses arising from certain types of business interruption (BI insurance) or the death or incapacity of key personnel (key man insurance). Many BI insurance policies however will not cover disruption caused by pandemic interruption or crisis so the business should check the terms of the policy and ensure that the actual position is communicated to the managers or board as part of the business continuity discussions and preparations.
It is possible that the insurer's liability may be limited or excluded if losses arise from a public health emergency under any special BI insurance policy that does cover disruption by large-scale staff absence, but such policy will need to be checked on this point. If there is an exclusion or limitation of liability, it is likely that replacement insurance, which does cover pandemic flu risk, will not be available or will be very expensive, while the threat of pandemic flu is high.
A few other points to consider regarding business travel insurance and key man insurance:
- Corporate travel insurance might not cover trip cancellations if the company or the employee cancels for fear of infection or disruption, rather than the cancellation occurring as a result of the airline's decision or the government's direction.
- Corporate medical cover for those abroad may not cover an infected employee if they are infected after travelling to a seriously affected region against official government advice.
- Keyman insurance may not pay out if the insured life ends because of travel contrary to public health or government advice.
These relevant policies should be reviewed and considered when looking at your broad business continuity plans with related risk and reward fully considered.
Update: 20th March 2020
Source: HM Treasury
If the only barrier to your business making an insurance claim was a lack of clarity on whether the government advising people to stay away from businesses, rather than ordering businesses to shut down, was sufficient to make a claim on business interruption insurance:
- the government’s medical advice of 16 March is sufficient to enable those businesses which have an insurance policy that covers both pandemics and government ordered closure to make a claim - provided all other terms and conditions in their policy are met. Businesses should check the terms and conditions of their specific policy and contact their providers if in doubt.
- however, most businesses have not purchased insurance that covers pandemic related losses. As such, any affected businesses should note the government’s full package of support, including the Coronavirus Business Interruption Loan Scheme and business rates holiday.