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Forced closures won't raise interruption claims: UK insurers

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Standard business interruption insurance does not cover a forced closure by authorities, the UK’s Association of British Insurers (ABI) says.

The association was commenting last week on the UK Government’s call to pubs, clubs and restaurants to close to minimise the risk of people gathering and spreading the COVID-19 virus. Many food and drink retailers had already closed due to a lack of demand.

The ABI says “a very small minority of businesses” buy cover that includes closure due to an infectious disease, while an even smaller number secure cover enabling them to claim for the presence or impact of a pandemic.

The UK Government clarification on Thursday “will help some of these policyholders claim if the other terms and conditions of the policy are met”, the ABI said.

But business interruption cover purchased by the “vast majority” of businesses only provides cover against day-to-day risks such as damage caused by fire, flood, theft and accidents involving employees.

Standard business interruption policies do not include forced closure by authorities. The cover is designed to respond to physical damage at a property which results in the business being unable to continue to trade.

Even if British Prime Minister Boris Johnson had issued a mandatory ruling that entertainment venues must close, compensation via business interruption policies would not have been possible in most cases.

UK insurers pay out £22 million ($44.27 million) in Britain each day to firms through these policies, the ABI says.