Coronavirus and insurance considerations
As businesses start to think about a return to office working over the coming weeks and months, consideration should be given to existing insurance policies and how they might be affected by changes implemented as a result of the current pandemic.
Insurers will need to be notified of any changes in risks or in working practices, so a review of existing policies may be required to ensure compliance with policy terms and conditions such as employer’s liability insurance, property and business interruption insurance, directors’ and officers’ (D&O) cover and cancellation insurance.
Employers liability insurance
The 1969 Employer’s Liability (Compulsory) Insurance Act and associated regulations require every employer carrying on business in the UK to insure against liability for ‘bodily injury or disease’ sustained by its employees where that arises in the course of that individual’s employment. Whilst ‘disease’ is not defined in the Act, it is likely to include the risk of an employee contracting COVID-19.
Although it is unlikely that insurers will look to exclude COVID-19 from this compulsory form of insurance, it is a criminal offence for an employer to fail to insure in accordance with the Act, so employers should check the terms of their policies carefully. If firms require their staff to return to work a risk assessment should be conducted to identify and manage risks appropriately.
Where an employer is deemed to have breached its duties or failed to comply with its statutory duties, including to protect workers against the risk of contracting COVID-19, they could be at risk of a recovery claim from their insurers as the regulations allow for rights of recourse by employer’s liability insurers.
In regard to workforce planning, return to work policies and the associated risks, employers might be well advised to ensure that those making the decisions are covered by directors’ and officers’ insurance.
Property and business interruption insurance
Firms that have been forced to close, resulting in a loss of revenue, could be covered by business interruption insurance if it offers limited cover for notifiable diseases or forced government closure in addition to the usual property damage. Many commentators have noted that most policies do not appear to respond to losses connected with the recent pandemic. However, the FCA is seeking legal clarity on which types of policy do respond to COVID-19 related claims. It is likely that there will be more developments in the coming weeks for businesses in relation to this.
Where a business has or intends to repurpose or change the nature of its operations then the property and business interruption insurance should be reviewed, and consideration given to the need to notify insurers of a change of risk. Failure to do so could lead to restrictions on cover or limit the amounts that can be recovered under the policy.
Other ongoing duties to insurers
Businesses have an ongoing duty to notify insurers of any changes to their risk profile such as plans to alter workforce practices and social distancing. Insurers may be entitled to impose new policy terms or charge a higher premium, depending on the terms of the contract. If you are in doubt about what changes require to be disclosed, you should contact your broker.
When renewing insurance policies, businesses should assess the adequacy and relevance of their portfolio moving forward and decide if all policies are still required. For example, corporate travel insurance might be procured on a more limited basis whilst ‘key man’ insurance might come to the fore.
For further information, watch the recent Ask ICAS webinar on insurance considerations with Alasdair Ross of Association of British Insurers and Jason Adcock of Marsh Commercial.