Market Update: Business Interruption Extensions to Covid-19 Losses
The COVID-19 pandemic has led businesses in the MENA region to seek recovery from their insurers for losses relating to business interruption. For most businesses, their business interruption (“BI”) insurance renewal this year will be far from business as usual. Navigating the renewal process correctly is essential for transferring risks appropriately.
In May, the Financial Conduct Authority (FCA) in the UK announced that it would commence court proceedings to test how certain business interruption insurance policies respond to claims arising from COVID 19. The Court released its decision on 15 September.
The purpose of the court proceedings was to clarify how certain business interruption policies and wordings should be interpreted and whether they cover losses arising from the COVID-19 pandemic. The Court found in favour of the majority of issues advanced by the FCA on behalf of policyholders. Below is a summary of the court findings and their implications:
- Non-damage BI extensions reviewed are capable of being triggered in the context of a global pandemic such as COVID-19.
- Cover would be provided for losses caused by the wider COVID-19 pandemic under the majority (albeit not all) of the Notifiable Disease extensions under consideration.
- With regards to the Non-Damage Denial of Access extensions under consideration, while cover is capable of being triggered, these clauses have, in general, been interpreted more restrictively than Disease clauses. The extent of cover available will depend on the precise terms of the policy and how the business was affected by the Government response to COVID-19.
A ‘consequentials’ hearing took place on Friday 2nd October where the FCA and six of the eight participating insurers have been granted permission to apply to the Supreme Court for permission to appeal, which is likely to lead to an appeal hearing in the coming weeks.
In light of these new developments, there could be significant effect on many businesses’ cover extensions to business interruption.
What does this mean for your business?
In Marsh, we have established a multi-disciplined team from across our claims organisation and internal legal function to analyse the judgment to help us understand the direct impact for our clients and how we can best guide them in relation to their claims. Not all policies will respond to COVID-19 BI losses, notwithstanding the detail of the judgment.
Working through the implications of the decision and commentary set out in the judgment is essential to review the impact of the decision on outstanding business interruption claims. Marsh is uniquely positioned to help guide clients through this complex phase. Our expert claims team will be reviewing each claim against the judgment and discussing next steps accordingly with clients, as well as advocating where possible with insurers to resolve any clients’ claims.
In Marsh, you can speak to a specialist to help you navigate through the developments of the uncertain claims process. The Marsh Claims Solutions team can provide you with the guidance and support you need to review and discuss the impact of the decision on outstanding business interruption claims.