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Covid-19 and insurance considerations

Given the novel nature of Covid-19 as a disease, it is not something that had been previously considered in insurance arrangements.

Therefore both organisations and their insurers are having to consider the wording of their policies to determine whether there is cover which would respond to any losses.  As Covid-19 has been formally classified as a notifiable infectious disease in the UK this can impact on insurance arrangements and the assessment of whether any claims made are payable.

There are four main areas of insurance cover which are likely to be affected in the short, medium and long term and we provide some comments on each one below:

Employers' Liability

It is a statutory requirement to have Employers' Liability Insurance in place and therefore cover should provide for any bodily injury or disease suffered by an employee in the workplace.  We would expect to see a number of claims arising in the coming months and years for employees who have contracted Covid-19 in the workplace. Losses may also extend to others who have subsequently caught the disease from employee. Proving causation is likely to be a determining issue in these claims.

Public Liability

Standard public liability will not exclude disease claims from third parties however associated personal injury claims including for example mental health claims for psychological damage are likely to be excluded. As above, causation will be a key issue.

Directors and Officers

This will include a provision for defence costs and sometimes investigation costs for individual liability for senior managers and statutory officers. It will be worth checking the policy wording for any exclusions and also considering whether claims arise before, during or after the pandemic.

Business Interruption

Again much will depend upon the policy wording as to whether the circumstances of a particular claim is covered here. Cover to include infectious diseases prior to the Covid-19 pandemic was not usually included in standard policy wording for business interruption claims and resulted in an increased premium.  Some specific extension policy wording is expected to respond to claims in this area including:

  • Interruption by communicable disease (which may include notifiable infectious diseases such as Covid-19)
  • non-damage denial of access or civil authority cover
  • communicable disease clean-up cover

However even where cover is provided under these extensions they may be subject to a specific financial sub limit or a fixed indemnity period of typically three months.

The key points for any organisation looking at their insurance arrangements in the context of Covid-19 liability and claims is to check the policy wording very carefully and notify claims as soon as they arise. This will be particularly important around renewal periods.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at May 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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