COVID-19 Insurance Update: 3 April 2020
Welcome to the first of our fortnightly updates aimed at supporting you in your understanding of the impacts of the COVID-19 pandemic on the insurance market.
Here, we offer a selection of insights and guidance drawn from our network. These are designed to provide practical consideration of the issues arising now, as well as those which we predict could represent increased exposure to the insurance sector in the future.
The reframing of insurance is likely to be set by a range of considerations - from different pressures on how people want to work, to a huge increase in appetite for insurance protection against a repeat of the current crisis; from an increased desire for more flexible, usage based insurance products to increased legislative pressure for insurers to be the ‘deep pockets’ needed to assist the business community.
For those who advise insurers, consideration of the expectations of insurers’ responses against insurers’ legal obligations and regulatory requirements have been brought into sharp focus.
A political reframing
Issues of concern are of course front and centre of governments around the world. In the UK, a range of support measures have been provided by government and regulators to key sectors of the UK economy, including financial services, energy, technology, transport and property.
Given the fluid policy environment, the government will likely further increase its guidance in the coming weeks. And it is worth noting that, whilst government will want to ensure business is supported during the outbreak, the principle focus of ministers will remain firmly fixed on SMEs and individual workers affected by the crisis.
Amongst key announcements is the postponement of COP26 UN climate change conference set to take place in Glasgow in November. While dates for a rescheduled conference in 2021 have been promised in due course, the world is under no illusion as to the extent of the disruption caused by the pandemic. Looking forward, we are likely to see change in most aspects of business – including as a result of the redrawing of the relationship between government and the private sector. The closer government get to business, the greater the impacts on business and one sector where that is being seen is in travel – with governments around the world providing emergency support to airlines.
For insurance, the government has confirmed that, for now, its advice of 16 March is sufficient to trigger insurance claims for those businesses with business interruption policies that cover pandemics and government-ordered closure, provided all other T&Cs are met. This is echoed by the advices issued by Lloyd’s of London, stating that where pandemic or contagious disease extensions are provided, Lloyd’s would expect these to include losses related to COVID-19. Nevertheless, the operation of BI cover is not without question – including in relation to the operation of the insurance in the context of whether coronavirus contamination is considered property damage.
Those responsible for managing business activities will be acutely aware of executing their duties as a director alongside government measures to assist certain businesses through the inevitable difficulties they will face as a consequence of steps being adopted to slow the rate of infection amongst the population.
The FCA is allowing companies time to consider the impacts on their business, and has announced that major regulatory overhauls will likely be on hold for now. It has asked firms to focus on the customer, rather than big change projects. Firms are expected to show flexibility in their treatment of customers.
Insurance in practice
The movement of goods has been firmly in the public and in insurers’ minds. Here, we provide our thoughts on frustration and force majeure in the logistics industry. We look at how this industry has been hit by the restrictive measures in place, and what happens when parties reach the point of considering their legal position when they are unable to meet their contractual requirements.
The construction industry is another feeling the pressure. Despite the Cabinet Office’s current guidance around continuation of construction projects, firms are alive to the possibility to enforced closure and we present the practical and contractual considerations for all parties to consider. The need for compliance with safety regulation will continue as normal and businesses will need to look at how they can ensure as far as practicable the health, safety and wellbeing of their employees and others in this fast changing environment. We offer some thoughts around the reality of construction companies continuing to operate on a risk-based approach.
In the casualty arena, we offer some consequences for serious injury claims, and consider the disruption to the usual processes of serious claims handling, and suggest some solutions. Ahead of providing our predictions for the likely impact of the pandemic on UK personal injury claims more broadly, we also offer some guidance about likely employers’ liability claims that may stem from the coronavirus and highlight the key elements of such a claim, including employers duties, risk assessments and causation.
And to end on a positive note, the implications for the life sciences industry are far reaching - from supply chain disruption to the implications of underwriting vaccines brought to market on a fast track. Nevertheless, in amongst the challenges faced, we consider that this sector, in particular, is presented with an opportunity to capitalize on rapid research and product development.
Links to all articles included in this update:
- Governments across the world step up to provide emergency support to airlines at the time of need: COVID-19
- Is coronavirus contamination considered property damage in the context of business interruption insurance?
- COVID-19 and your duties as a director
- UK regulators allow companies time to consider COVID-19 impact
- COVID-19: frustration and force majeure in the logistics industry
- COVID-19 – if sites close, what next?
- First aid in the construction industry amidst the COVID-19 pandemic
- Coronavirus: consequences for serious injury claims
- Guidance: COVID-19 and employers’ liability claims
- COVID-19 and the life sciences industry