Earlier this week, the government has recommended that the public should avoid attending clubs, bars and restaurants as well as working from home if possible. Because the government has not ordered business closures this has led the hospitality sector to criticise its decision due to the fact that businesses now would not be able to claim under their insurance if they weren’t ordered to close.
The Association of British Insurers (ABI) have said that many companies would not be able to claim compensation due to closures because the standard business interruption cover purchased by most companies will not include closures due to an infectious disease or forced closure by authorities.
“Irrespective of whether or not the government orders closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed by the coronavirus,” they stated.
In this case, even if companies had cover against closures due to infectious diseases, because the government has not ordered closures that might be difficult for British companies to claim insurance due to COVID-19.
The ABI also have warned that even if the government does order business closures, most British companies don’t have the right insurance to protect them if they collapse.
“A small majority of typically larger firms might have purchased an extension to their cover for closure due to any infectious disease,” the ABI explained.
“In this instance, an enforced closure could help them make the claim, but this will depend on the precise nature of the cover they have purchased, so they should check with their insurer or broker to see if they are covered.”
Rishi Sunak, Britain’s finance minister, explained that for companies with a policy that covers pandemics, government action was sufficient to allow them to make insurance claims against their policy however did not specify what government action would be taken according to Reuters.
Yesterday many establishments and companies have been closed including Carphone Warehouse and even the Tate in London. Insurance companies may need to make large payouts to companies who may go bust due to COVID-19.
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