COVID-19: Insurance Policies – issues to consider, Mar 2020

Insurance Considerations - the terms and conditions of your insurance policy

Insurance Policies – the economic first responders

The biggest insurance claims to date arose from Hurricane Katrina which cost the insurance industry $ 125 billion, followed by claims arising from the terrorist attacks on 9/11 which cost the industry $ 32.5 billion. The level of these claims will clearly be surpassed by claims arising as a result of the Covid 19 worldwide pandemic. Insurance companies are now economic first responders and the cost to the industry will be staggering. It is likely that many insurers will look to the small print in policies to make arguments why claims should not be met. All the more reason for policyholders to be extra vigilant when considering whether a claim can be made on various insurance policies in place.

Business Interruption

Business interruption cover is intended to protect businesses against income losses sustained as a result of disruption to their operations. Business interruption cover can arise where there is:

  1. disruption to distribution and supply;
  2. denial of access to premises due to civil authorities’ orders;
  3. loss of use.

In relation to business interruption claims, where policies have no exclusion clause for loss of use or loss of an insured premises due to virus, it is arguable that this may constitute physical damage or physical loss or damage. Precedent cases in America and in the United Kingdom accept that even temporary contamination of premises may amount to physical damage or physical loss or damage sufficient to trigger business interruption cover.

Some policies can be relied on where the policyholder sustains “direct physical loss or damage” to the insured property by a covered cause of loss. Insurance companies may dispute whether a physical loss requirement has been met. Courts in a number of jurisdictions have held that contamination and other incidents that render a property unfit for intended use or which become uninhabited constitute “physical loss” sufficient to provide that business interruption cover applies.

Similarly, contingent business interruption provides insurance for losses arising from disruption to a business’s customers or suppliers, usually requiring that the underlying cause of damage to the customer or supplier is of a type covered with respect to a business’s owned property. Policyholders may be able to make an argument that such cover should apply when a Civil Authority prohibits or impairs access to a policyholder’s business and for some companies who have Civil Authority cover any such direction by a Federal/State or local Government may trigger such policy cover.

Cancellation/Abandonment Insurance

Companies may also have cancellation or abandonment insurance if such cover is not excluded by a policy. Some policies may have exclusions only for specifically known diseases such as Swine flu or Avian flu and such policies arguably may not include exclusion for Covid 19. Similarly, if there is a direction given by a Civil Authority against travelling as a result of a communicable disease, an argument can be made that such cover applies.

Public Liability and Employer’s Liability

For employees and clients and the public, claims may be sustainable under public liability or employer’s liability for example in the tourist industry where employees can argue that employers failed to protect them. For those working in the healthcare industry claims may be possible under professional indemnity insurance where adequate steps have not been taken to protect such employees. Similarly, an argument could be made that cover should be provided for an occupational disease. In such cases workers would have to establish a direct cause or link to the workplace but this could provide an argument for workers compensation under insurance cover.

Errors and Omissions Cover

For some companies where there is errors and omissions insurance cover this could apply to the healthcare facilities, and professional liability cover may well be available if damages or bodily injury arise from the provision or failure to provide medical services.

Political Risk

Some companies may have political risk insurance which provides cover for business interruption even though no physical damage was caused for actions taken by a host country’s Government, but where loss has arisen from operations in a host country resulting from direction from a local Government, health Authority or otherwise.

Commercial General Liability

In the hospitality industry infected guests may find that any damage caused to them could be covered by commercial general liability as a result of failure to take reasonable care from exposing them to risk.

Force Majeure

“Force Majeure”, which means superior force, can be relied on to exclude liability for breach of contract where there is delay or failure as a result of an extreme event outside the control of the breaching party. It may be possible for companies to argue that Covid 19 is a force majeure event, and that the virus is for example an “act of God”. Many policies limit force majeure such as storm, flood, war, explosion etc but again attention should be paid to the wording of such policies as they often include the words “including but not limited to”. Under such policies it is arguable that Covid 19 would be included.

Some force majeure contracts exclude infectious diseases but again much will depend on the specific terms of each policy. The parties would have to show that the performance was impossible rather than uneconomic or difficult.


The takeaway position is that policyholders should carefully review the terms and conditions of their insurance policies to determine whether an argument can be made for cover during this Covid 19 crisis. Notification of a claim often must be made within a period and businesses need to act quickly and carefully in relation to making any claims under their insurance policies. Much depends on the specific language wording of each policy and companies should evaluate their policies to limit their exposure to loss in this worldwide pandemic. All policyholders should not make assumptions of cover or lack of cover during this outbreak, each case will be high fact dependent and cover will depend on the language of specific policies at a time when, when for many companies their very existence and solvency is at stake. Insurance policies may be for some the key to economic continuity and survival.


Professional advice should always be taken before acting on any of the matters discussed. Please contact a member of our team should you wish to discuss this topic further.