The Association of British Insurers (ABI) has suggested that many businesses in the UK are unlikely to be able to call on their insurance cover for standard business interruption (BI) as a result of the COVID-19 outbreak, irrespective of the Government ordering closures.
When addressing the nation yesterday, UK Prime Minister Boris Johnson outlined a number of more stringent measures in an effort to mitigate the spread and impacts of the ongoing COVID-19 outbreak.
He advised against gatherings and meetings in pubs and clubs, and also against visiting theatres and similar social venues.
However, the Prime Minister did not order the closure of businesses and venues and this move has been met with both confusion and anger in a number of industries, with individuals noting that the order of closure would enable businesses to call on their insurance protection at such a challenging time.
A BBC report highlights numerous comments from individuals in the music and theatre industry, including Patrick Gracey, the producer of the play Leopoldstadt. Gracey has said that the prime minister has “doomed an entire industry” by advising people not to attend but by not ordering the closure of theatres.
“By not enforcing a shutdown, production insurance will not apply so producers and shows will go bankrupt, and tens of thousands of people will be without pay,” said Gracey, as reported by the BBC.
Since the prime minister’s latest advice and the reaction from numerous industries, the ABI has commented on business insurance and the virus outbreak.
“Irrespective of whether or not the Government orders the closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed by the Coronavirus.
“Standard business interruption cover – the type the majority of businesses purchase – does not include forced closure by authorities and it is intended to respond to physical damage at the property which results in the business being unable to continue to trade.
“A small minority of typically larger firms might have purchased an extension to their cover for closure due to any infectious disease. In this instance an enforced closure could help them make the claim, but this will depend on the precise nature of the cover they have purchased so they should check with their insurer or broker to see if they are covered.”
So, according to the ABI, many firms, regardless of the Government’s official closing of venues or not, will likely not be able to call on their business interruption cover as a result of the COVID-19 outbreak. These are extremely uncertain and challenging times for industries and businesses of all shapes and sizes, and only time will tell just how damaging this virus outbreak will be on economies at both a micro and macro level.