Business Interruption Insurance

What is business interruption insurance?
Business interruption insurance is a form of business insurance that provides coverage to the policy holder for certain financial losses suffered by the business if it is unable to operate its business as usual due to an unforeseen event.

Some policies refer to business interruption insurance as “revenue protection” or similar, and the business interruption element of the cover often forms part of a wider business insurance policy rather than being a standalone policy.

Business interruption insurance policies will often cover lost profits and increased running costs resulting from business interruption as a result of unavailability of the business premises due to natural disasters and other circumstances. Coverage varies on a policy by policy basis, so it is important to check policy wording and schedules of cover carefully.

What does your business interruption insurance policy cover?
Coverage scope and limits vary by policy, as do policy exclusions – as a result, some policies may provide coverage where others do not. Policy schedules and wording must be checked on a case by case basis to establish what a policy covers. Policy wordings are often not easy to navigate – we can help you understand what your policy covers.

As well as providing a degree of coverage for lost profits and increased running costs resulting from business interruption as a result of unavailability of the business premises due to natural disasters and other circumstances, some policies will also provide some protection in respect of closure of business premises in other scenarios – for example in the event of closure by a public authority or based on an outbreak of a disease at the business premises or within a certain radius of it.

If you are unsure whether or not your business interruption policy should provide coverage in respect of a particular scenario, please contact us for assistance.

The regulatory landscape
Business interruption insurance is firmly on the Financial Conduct Authority’s (FCA) radar – details of the steps that the FCA is taking can be found here.

On 9th June 2020, the FCA started a claim in the High Court  to obtain court declarations in an attempt to resolve the contractual uncertainty that currently exists around the validity of some claims under business interruption insurance policies. The Hight Court hearing is scheduled to take place 20th – 23rd July and 27th – 30th July 2020.

General FCA principles and rules apply to the sale, administration and claims handling related to business interruption Insurance policies, and the Financial Ombudsman Scheme is available to eligible complainants (typically where a policyholder is a business with an annual turnover below £6.5m, and fewer than 50 employees or an annual balance sheet below £5m).

How can we help with a business interruption insurance policy?
We advise businesses on whether or not their business interruption insurance policy provides coverage in respect of an incident that has occurred in relation to their business

We are also on hand to advise businesses on the available options if they are dissatisfied with the response they have received from their broker or their insurer in respect of an enquiry or a claim under a business interruption insurance policy.

Please contact our commercial team.

Mark Chapman
Partner, Commercial
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This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

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