COVID-19: Insurance Risk Guide for UK Companies.

COVID-19: To be insured, or not to be insured?

This week, SHRG has received a high number of calls and seen various posts across social media, from concerned companies regarding COVID-19, and the effect it is having upon their daily operations, workforces and more. Many companies have asked us questions relating to Insurance, specifically Travel Insurance for their workers. SHRG collaborated with insurance expert Oliver Roberts and owner of justquoteme.co.uk, to put together this guide to support UK businesses.

Are we covered for loss and travel?

This depends on a few factors such as: When your cover started, what your business activities involve, the countries you are travelling to or from on business, which types of Insurance your business holds, and the exact wording of your Insurance policies.

Businesses should be in constant contact with their insurance providers during this time, to ensure they are fully updated and aware of any changes or further implications regarding essential travelling for business purposes. 

Do we have to take out any additional policies for full coverage?

In a nutshell, No. There are currently no additional packages being offered to businesses by insurance providers in connection with COVID-19. It is best to check your pre existing policies, such as business interruption or check event insurance or credit insurance to determine if you are covered.

Many of our clients have cancelled work due to COVID-19, can we claim any compensation for reduced activity?

Most businesses will have the benefit of “business interruption” cover which generally covers loss of income or loss of gross profit, in the event the business is interrupted or adversely affected due to reasons beyond the policy holder’s control. Conventional business interruption cover is subject to a “material damage proviso, namely that in order for an “interruption” to be covered, it must be caused by physical damage covered under the policy holders property damage policy, for example, interruptions caused by fire or flood.

However, many policies also include cover for interruptions caused by other factors, such as, infectious diseases. Depending upon the specific cover under the policy, interruptions caused by COVID-19 may in some cases be covered under a business’s interruption policy, subject to certain considerations. These being:

·        Public Authority Closures: 

Is the disease notifiable? - COVID-19 was declared a notifiable disease by the UK government at 18.15 on 5th March. However, this does not have retrospective application, so for policies that require a disease to be notifiable as a pre-condition to coverage, any closure prior to this date would not be covered.

Has COVID-19 been confirmed at the business premises? – Cover under some business interruption policies only applies where the disease has been detected at the premises that are to be closed, whereas others only require there to have been an order from a competent authority that the premises be closed as a result of the disease. For any companies that are considering closing their office doors as a precautionary measure, it is worth checking your policy, as doing so may mean you do not benefit from your insurance cover.

·        Voluntary Closure

Many businesses are considering a temporary closure as a precaution against the further spread of COVID-19. While that may be a sensible precaution, most business interruption polices will not cover losses arising from precautionary closure. Equally a decision to require individuals, who may have been exposed or at high risk of COVID-19 to self-isolate will not be covered.

·        Recoverable losses:

It is important to remember that, as with all insurance policies the policy holder is under a duty to minimise the risk to their business and losses. Businesses would be expected to take precautionary steps, such as, facilitating home and remote working, reduce any variable costs where possible, attempt to fulfil orders using other cheaper suppliers, arrange meetings at alternative locations.

       Time excess:

Where a business interruption policy does respond, it is important to note that it will usually be subject to a “time excess or franchise” period, which is very often a set number of hours or days. Where the policy is subject toa time excess period, no cover will be in place for any losses occurred during the period of the excess. For policies that refer to a “franchise period” the full loss will be covered, subject to the interruption period exhausting the franchise period.

 Are we covered under any other Insurance policies?

It may be worth checking with your insurer to determine exactly what cover you have and the policy triggers for each one in turn. You may find that your business is covered for loss under other insurances such as Event insurance or Credit Insurance. The outbreak has already led to many trade, arts and sporting events being cancelled, many of which would be covered under bespoke event cancellation policies. Where credit insurance is held, this protects the business from the risk of non-payment by a contractual counterparty, and usually covers a specific risk or book of business. TO the extent that supply chains may become disrupted and payments are not fulfilled, these policies may respond.

However, for event insurance the policy trigger would have to be met. Whether insurances respond to such cases concerning events to be cancelled would depend on the precise wording of the policy. Credit Insurance requires that the underlying obligor had a legal obligation to pay, as it insures credit rather than legal risk. Accordingly, where it is excused from its payment obligations as a result of an outbreak, for example because of a force major clause, there could possibly be no cover for the resulting non-payment.

Will essential business travel void our insurance?

Not necessarily, this again depends on your type of cover. If your business already holds a pre-existing business travel insurance policy, you may find that your employees are covered for the following:

·        Can cover provision of emergency medical treatment and repatriation.

·        Can pay for replacement staff.

·        Can cover leisure trips for directors

It is worth keeping in mind though that many business travel insurance policies will have certain clauses that will be dependent on official government guidance. These are more likely to cover the cancellation of travel plans to destinations where the UK’s Foreign and Commonwealth Office (FCO) have advised against travel, than the cancellation of plans taken out as a precaution by the business.

For workers concerned that they may suddenly be faced with the possibility of having their insurance cancelled, be aware that key factors will include the date of travel, the date of which the FCO issued travel warnings and whether or the policy expressly excludes pandemics/epidemics.

Could an employee’s personal travel plans affect our insurance?

HR teams should be leading companies and employees. Effectively monitoring staff holidays and communicating with employees, HR should look to establish where employees are intending on travelling to, during their time off. For HR to gather as much information as possible prior to the employee taking their leave of absence, it gives the company more time to prepare, if necessary, and to ensure all other employees are kept fully informed and protected.

If employees are intending to travel to countries on the FCO list for travel warnings, then precautions should be taken on the employees return prior to work and entering the workplace. Failing to do so could trigger claims made against businesses by their employees for failing to effectively protect or make them aware of potential exposure to COVID-19.

It is worth remembering that claims can be taken out against Directors personally for failing to protect employees under these circumstances. D&O Liability Insurance Policies should be checked to see exactly what is covered. Precautionary measures should be taken to mitigate any possible action or inaction taken by the business or managers, that may result in a claim being taken against a company director for negligence 

Are there any recent changes made by insurance providers that we need to know about?

Five travel insurance providers have made changes to their travel insurance policies or stopped offering the altogether as we have seen in the case of LV insurance. To date these companies are:

Aviva – Halted all single-trip direct travel insurance to all new customers travelling to Italy. Aviva have also withdrawn add-ons to insurance such as “travel disruption” and “airspace closure”.

InsureandGO – Owned by Mapfre of Spain, announced that any customers who bought policies after 11.59pm on the 11th March 2020 will no longer be able to make any COVID-19 related claims.

Post Office – Continuing to sell travel insurance but any policies bought after the 11th March 2020 would no longer cover COVID-19 related claims.

LV Insurance – Announced on Wednesday 11th March 2020, that with immediate effect LV would stop selling all travel insurance policies due to the Coronavirus outbreak.

AA – No longer quoting for single trip policies covering Italy, France or Spain.

Are there any other risks that may affect our Insurance Policies or ability to claim?

For companies that have chosen not to cancel travel arrangements or events, they should be mindful that as the policy holder they do have a responsibility to reduce the overall risk to operations and employees. Some insurers could argue that businesses who continue to send employees abroad, after COVID-19 has now been officially declared a pandemic, would be classed as negligent and could possibly refuse a claim on this basis.

In addition to this, where businesses chose not to cancel travel arrangements, they may also become liable to claims from employees, customers, members or the public or possibly shareholders.

Customers or members of the public may be owed a duty to be adequately protected from contracting Coronavirus or to be warned of the risk to exposure. They may also be entitled to compensation should your business close and fail to deliver goods or services to customers.

Various Insurance policies could be triggered:

·        Public Liability insurance – might cover operators or premises for claims from customers and members of the public, for failing to adequately protect them from exposure.

·        Employers’ Liability Insurance – This would normally cover diseases that an employee risks exposure to in the normal course of work (for example, health workers treating infected patients or laboratory technicians investigating COVID-19). However, it might also cover scenarios such as an employer that, knowing that an employee had travelled back from a country on the FCO list and has been exposed to COVID-19, then fails to implement adequate steps to protect other employees.

·        Directors and Officers (D&O) / managers’ liability insurance might be relevant to potential claims relating to an alleged breach of Directors duties or in circumstances where a senior manager (In the scenario of an employee returning from a country on the FCO list) fails to protect employees or notifies them of the danger from exposure. 

If we are not covered by our Insurance Policy, is there anything we can do to cover loss of profit as a small business?

For any companies who find they are not protected for business interruption, through their existing Insurance policies, they should explore the new loans made available by the government. On the 11th March 2020, the Chancellor announced a new “package of measures” to provide for businesses to ensure the impact of COVID-19 is minimised.

The government have introduced a new Coronavirus Business interruption loan scheme, delivered by the British Business Bank, which will enable businesses with a turnover under 41million to apply for a loan of up to 1.2 million, with the government covering up to 80% of losses with no fees incurred.

For businesses with fewer than 250 employees, the cost of providing 14 days SSP per employee will be fully refunded by the government.

There will be a ￡3,000 cash grant available to 700,000 micro and small businesses, delivered by Local Authorities, worth ￡2 billion.

 Useful resources for UK businesses are:

The Foreign and Commonwealth Office, for travel information click on this link to stay informed of all updates https://www.gov.uk/foreign-travel-advice

World Health Organisation, for health and travel advice click on this link to keep updated https://www.who.int/

To find out more about UK government backed loans, click here to access further information https://www.gov.uk/government/news/what-support-is-available-for-my-small-business

For updates regarding Insurance, click here to access the ABI website, https://www.abi.org/covid-update