Question #9

Our organization has suffered a loss in income because of the Covid-19, to what extent would that loss be covered by our insurance policy?

Similar to travel insurance (see questions 7 and 8), your ability to claim for a loss of business income will always depend on the precise terms of your specific insurance policy. 

Insurance which is referred to as “business interruption”, “BII” or “revenue protection” insurance is designed to (a) cover loss of income and/or (b) additional business expenses caused by an insured event. However, at present there is no guarantee that business interruption policies will cover loss arising from the Covid-19 pandemic. 

This issue is receiving attention from regulatory authorities worldwide. It is likely that the Courts in certain jurisdictions will be asked to consider cases that concern the scope of business interruption insurance and as a result more guidance on this issue may be available in the future.

Here is some general guidance which will assist you when you are looking at your existing policy: 

  • Make sure you have the complete copy of your insurance policy. Insurers often focus on policy “summary” or “schedule” document when you receive your insurance documentation. However, the policy summary will not include all the information that you need. The full policy, with all the terms and conditions, should have been included in the documents you were given, otherwise contact your insurer to request the full policy. 
  • Check if your policy includes “business interruption” coverage – this may appear as an additional document (which may be described as an “endorsement”) at the end of a wider main policy. 
  • Your business interruption insurance will describe certain types of “trigger” or “contingency” events, where loss of income arising from those events is recoverable. You should check to see if your policy includes any trigger events which cover the Covid-19 situation. For example:
    • does the policy refer to cover for physical damage? If your organization’s property was contaminated with coronavirus in a manner which required specialist decontamination services, this may constitute physical damage. However, this legal position has not been fully tested and there may be difficulties in proving that contamination actually occurred (as opposed to a fear of contamination).   
    • Does the policy refer to cover for the consequences of certain infectious diseases, (e.g. the inability to use your organization’s premises due to the occurrence of an infectious disease)? 
        • After the SARS epidemic in 2003, certain insurers started to refuse to cover for loss caused by infectious diseases, so you should check the “Exclusions” section of the policy.
        • If cover for infectious disease is included, cover may be restricted to a specific list of infectious diseases – in which case, Covid-19 will likely not be listed. 
        • Alternatively, cover may be restricted to a general category of infectious diseases which are “notifiable”, meaning that they must be notified as a matter of law. If you have this type of clause in your policy, your policy may only cover losses after 8 January 2020, (this was the date when the Hong Kong government classified Covid-19 as a statutorily notifiable disease).
      • Check whether the cover extends to a general occurrence of an infectious disease, or whether the infection disease must be found to exist at your organization’s premises. 
    • Does the policy refer to cover for losses arising from government restrictions e.g. forced closure by a relevant public authority?
    • Whether the policy refers to “denial of access” cover, which could cover the closure of a premises for reasons beyond your control. 
  • Importantly, if it is possible for you to make a claim for loss of income, you should think about how to best preserve any evidence you would need to prove (a) the loss of income and/or (b) any additional costs of working which were caused by Covid-19. 
  • As with other types of insurance, there may be a maximum amount which the insurer will pay out. There may also be a “deductible” or “excess”, which is an amount that will not be covered by the insurers. For example, in the case of car insurance, if there is damage of HKD 10,000 but the insurance policy has an excess of HKD 1,000, then the insurers will only pay out HKD 9,000. 
  • Check if there are any timing requirements for when you must make a claim. For example, does the claim require “immediate notification”?
  • Check if there are any other specific procedural steps which must be taken when making a claim (for example, it may be necessary to supply certain information and documents). If you do not follow the right procedure, this may give an insurer a valid reason for rejecting the claim.