ISR and COVID-19: Will your policy respond?

The rapid spread around the world of COVID-19 has no doubt caused significant disruption to businesses of all sizes and scales. Despite this significant disturbance, it is highly unlikely that any Industrial Special Risk (ISR) policy, and in particular the business interruption section of the policy, will respond to the COVID-19 pandemic.

We have been monitoring the situation regarding the insurance response to the COVID-19 pandemic and there has not been a unified approach between all insurers. It is advisable that you review your policy before proceeding with any action that will result in a potential business interruption claim.

For the business interruption section of an ISR to respond, usually there first needs to be ‘damage’ to insured property. There are limited extensions of this requirement for damage and two of those are closure by regulatory authority and closure by infectious diseases.

The closure of your business by a public authority can constitute ‘damage’ under certain ISR policy wordings. However, many ISR policies will go on to exclude damage caused by pandemics or communicable diseases from business interruption cover, regardless of the fact that the business has been ordered closed by a public authority.

If your business does have infectious diseases cover there are usually significant restrictions of this cover including a significantly lower limit of indemnity.

As COVID-19 has been declared a pandemic by the World Health Organisation, the reality is that most ISR policies will not respond to business interruption sustained as a result of COVID-19.

Again, as all insurance policies are not the same, it is important to consider that each policy will turn on its own wording, in particular the exclusions and individual endorsements need to be considered in detail.

Please contact our team if you would like us to consider your specific ISR policies and cover.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.