How to Cover Covid-19 Business Interruption? ~ Insurance Academy

Covid-19 is spreading all over the world. The Covid-19 virus spreads through various intermediaries, be it paper money, plastic, iron, cloth and so on. Public facilities and entertainment venues were forced to close. Factories that are not related to daily necessities, logistics, and medicine are also advised to close. Surely, this causes a decrease in turnover from companies that buy Property All Risk Section I and Section II policies at the same time?

To be able to guarantee covid-19, the police need to include infectious or contagious disease, food or drink poisoning; murder, suicide policy extension clause. The clause is shown in wording as follows:

“Loss as insured by this Policy resulting from interruption of or interference with the business directly arising from an occurrence or outbreak at the Insured’s premises only and limited to :

Closure or evacuation of the whole or part of the Premises by order of any Government, Local Government or other Statutory Authority consequent upon :

• (a) Any discovery of a Notifiable Disease (as defined below) at the Premises, (b) Any discovery of an organism at the Premises likely to result in the occurrence of a Notifiable Disease,
• Food or drink poisoning
• The discovery of vermin or pests at the Premises,
• Defects in the drains or other sanitary arrangements at the Premises,
• Any occurrence of murder or suicide at the Premises,shall be deemed to be loss resulting from Damage to the property used by the Insured at the Premises.”

In the context of COVID-19, the above clause allows the insurer to compensate for business losses suffered by the insured due to the closure of the insured’s place of business by the government as a result of the “Notifiable Disease” in the area where the insured’s business is located. Thus, there are at least three conditions that must be met so that business disruptions due to the spread of COVID-19 can be covered by the insurance.

The first requirement is related to business closure as a result of the outbreak. Business interruption can be covered if the closure of the place of business is carried out on the basis of instructions from the government. If the business closure is carried out on the initiative of the owner or business actor in order to prevent the spread of disease, the resulting loss cannot be covered by insurance.[6].

The second requirement is that COVID-19 must be included in the Notifiable Disease category. In this clause, Notifiable Disease is defined as a type of disease which, based on the laws and regulations, must be reported to the competent government. This Notifiable Disease does not include SARS, AIDS, H5N1, H1N1 and mutations of H1N1. Thus, if it is medically stated that COVID-19 is still classified as a SARS disease, COVID-19 cannot be included in the Notifiable Disease category. Thus, the insurer is not responsible for business interruption coverage.

In addition, it is still related to Notifiable Disease, the time when the government declared COVID-19 as a Notifiable Disease is also very important as a reference in determining when this clause works. If the business interruption has occurred before the government declared COVID-19 as a Notifiable Disease, then the losses incurred cannot be covered[6]. For example, the case of SARS that occurred in Hong Kong since February 2003 caused many hotels to claim business interruption to the insurance company. The Hong Kong government granted the status of Notifiable Disease for SARS on March 27, 2003. Thus, the insurance company rejected claims for business interruption that occurred before March 27, 2003.[7,8]. For additional information, the UK declared COVID-19 as Notifiable Disease on 5 March 2020[9].

The third requirement is that Notifiable Disease must be confirmed to infect the place of business that is the object of coverage. Outbreaks of Notifiable Disease on a premise can be indicated by the presence of employees who are confirmed positive for COVID-19. Generally, after there is information about the outbreak of Notifiable Disease in a place of business, the place of business will be immediately closed (lockdown) for a thorough cleaning.

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