Business Interruption Cover and Covid-19 - the FCA Test Case
28 September 2020

Interruptions to your charity or business activities due to Covid-19 and the FCA Test Case

Updated 3 February 2021 following the Supreme Court judgement

If you currently hold a property insurance policy through Unity, you may have Business Interruption (BI) cover as part of your policy. Such insurance exists to cover loss of income or the cost of alternative ways of operating . However, depending on the wording of your policy, this may not necessarily cover you for the COVID-19 outbreak and the adverse effect the subsequent lockdown may have had or is continuing to have on your charity or business. 

As BI cover is often part of a wider property insurance policy, without physical damage from a covered section, income loss associated with people choosing not to travel and/or not to patronise a business (even if travel is restricted by a government authority), is unlikely to lead to a valid claim under most property insurance policies.

That said, The Financial Conduct Authority (FCA) that regulates the insurance industry has received a number of questions and concerns from customers where their business interruption policies do not cover losses associated with COVID-19.  As a result, the FCA sought court declarations aimed at resolving contractual uncertainty in selected BI insurance policies.

What the test case’s judgment means for you as a policyholder

The ruling provides more legal certainty in the business interruption insurance market, which should mean quicker answers to your claims questions.  However each insurer and policy needs to be considered separately.

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 insurance policies, which require “physical” damage to the building before cover will apply, do not.

However there may be extensions for “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 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).

If your policy includes these clauses you may be able to claim for Covid-19 related business interruption costs and losses. 

If you have made a claim on your BI cover

If you have made a claim under your business interruption policy and this has not been accepted or settled, your insurer should assess your claim, or re-assess your claim if it was declined, in light of the ruling, and contact you directly. 

How claims on your policy’s BI cover will be affected

Depending on your insurer’s wording, you will be affected differently by the court’s decision.  We have looked at the main insurers that we use. Please check below on how this affects your policy.

Scout and Guides Property and Equipment with Atrium – Business Interruption claims without property damage are not covered. https://www.unityinsuranceservices.co.uk/blog/coronavirus-and-your-property-and-equipment-insurance

Ansvar - losses arising from the COVID-19 pandemic are not covered by Ansvar’s policies. https://www.ansvar.co.uk/policyholders/fac-test-case/

Ecclesiastical - losses arising from the COVID-19 pandemic are not covered by Ecclesiastical's Business Interruption policies. https://www.ecclesiastical.com/latest-news/fca-test-case/ 

Zurich - do not provide cover https://www.zurich.co.uk/business/coronavirus/business-interruption-fca-test-case 

Markel - Markel still considering how this implicates them but a letter will be sent to all claimants. https://uk.markel.com/insurance/news/announcement-for-non-damage-business-interruption 

 

Answering your questions

If you’re claiming on your Scout and Guides Property and Equipment policy, please contact our Claims Handler on 0345 0407701.

Otherwise, please contact the insurer’s claims handling services, whose details can be found in your policy documentation.