COVID-19 Highlights Gap in Non-Damage Business Interruption Cover

Over the course of the COVID-19 pandemic, a significant gap in non-damage business interruption (NDBI) protection in Europe has emerged, brought about by the lack of supply of insurance products and the limitations of their cover.

Most risk managers feel that their organisations were well prepared to handle a pandemic. Nonetheless, the vast majority say their companies have suffered negative operational and financial impacts as a result of COVID-19.

In a recent survey conducted by the Federation of European Risk Management Associations of its members, only 5% of respondents said that insurance provided their organisations with cover for business interruption (BI) losses stemming from the pandemic.

COVID-19 and property damage

In theory, in order for BI and contingent business interruption policies to pay out, there must be physical damage to an insured property. This is usually defined as the destruction, or deterioration, of the property.

However, it is still a matter of debate whether the presence of SARS-CoV-2 — the virus that causes COVID-19 — on a premises constitutes a physical damage trigger. Insurers may argue that a virus would die, even without the disinfection of surfaces, in a relatively short period of time.

Some legal cases have already favoured insureds on this point. Further down the line, however, these victories are likely to result in the direct exclusion of NDBI cover.  

Observations on BI claims submitted so far

Conditions remain challenging for many businesses, as they contend with reduced revenues, lockdowns, the possibility of severe supply chain disruptions, and the absence of both employees and customers.

Consequently, many have drilled down on their insurance policies, and submitted BI claims.

There are two takeaways from the claims made to date. First, most insurers are yet to offer a definitive stance on policy coverage, where COVID-19 and BI are concerned.

Second, significant issues are expected to arise relating to the quantification and measurement of BI claims.

Even if a policy is triggered and a claim is valid, there is likely to be discussion around quantification and wide area damage. The latter assesses how a business would have performed had the policy not triggered. For example, if a retail business would not have had any customers due to the pandemic, the question arises whether a denial of access to its stores actually resulted in an additional loss.


Given the anticipated heavy claims environment going forward, businesses are advised to act swiftly, with regards to their insurance claims.

Risk management teams should determine early on whether BI triggers apply to their policies, and notify insurers of claims as soon as possible. Work should start promptly on the quantification of a loss, by modelling either the current or anticipated BI loss, in order to support requests for interim payments, and to demonstrate the size of the loss in relation to the policy limit.

Recovery from the COVID-19 pandemic — and the resolution of outstanding claims — is far from complete, and much uncertainty remains about the path forward. For now, organisations can focus on ensuring claims best practices — including diligent development of claims, providing supporting documentation to insurers, and ensuring clear and regular communication with key stakeholders — to position themselves to realise better outcomes.