Although there are no known UK cases yet, the advice looks at policy extensions if this were to happen 

Loss adjuster Sedgwick has offered advice for UK brokers, insurers and claims handlers when dealing with business claims relating to the Wuhan coronavirus, which has now spread to France and Germany.

The new strain of coronavirus, which has caused over 100 deaths in China so far and counted thousands of cases, has not yet affected the UK so is at present not a Notifiable Disease.

Notifiable Diseases are covered under some policy extentions, and include things like Severe Acute Respiratory Syndrome (SARS), typhus, smallpox and plague.

The bulletin highlighted previous examples where businesses have suffered loss before diseases have been designated ‘notifiable’, for example the SARS outbreak in Hong Kong in 2003.

In that example, the disease spread to Hong Kong in February 2003, but was not declared notifiable until the end of March that year. Meanwhile, businesses took a hit from February and beyond.

The news follows Marsh issuing a warning to businesses on the risk of the Coronavirus last week. 

Test case

A test case was brought by The New World Harbourview Hotel in Hong Kong, which ruled that turnover had been affected since February.

”In other words, claims should be dealt with on the basis that turnover would have been impacted by SARS even if it had not become a Notifiable Disease,” Sedgwick said.

”Whilst some policies list the specific diseases that are covered, obviously that won’t include diseases that were unknown at inception.

”Other policies provide wider cover by allowing diseases which are Notifiable at the point that a claim is submitted,” it said, adding:”Typically, policies require a specific outbreak of (rather than a general fear of) a Notifiable Disease, and will also specify a distance within which the outbreak must occur.”

General economic downturn is not usually covered, as was seen the 1980s and 1990s outbreaks of ‘mad cow disease’ in the UK.

However, there are other policy extensions that offer wider cover by allowing diseases which are notifiable at the point a claim to be submitted.

What about the UK?

Although there are no known cases in the UK at present, Damian Glynn, head of financial risks at Sedgwick said in its bulletin that there are other policy extensions that could be relevant in the UK should there be an outbreak.

These include:

  • Act of competent authority (non-damage denial of access): Policies do not tend to cover business interruption losses because the police or another agency restrict access or hinder the use f their premises. Wordings require these restrictions due to some other occurrence such as disturbance, commotion, emergency or danger in vicinity. Wording also requires physical prevention not just hindrance or advisory guidance for a claim to be successful.
  • Supplier/customer extensions: Wordings in these can be poorly defined, with a challenge around the terms – customer and supplier. While these may intend to apply only to the entity that a policyholder trades with, it can sometimes include more than one supply chain.

Cover requires damage at the supplier or customer premises such as outbreaks causing hospital closures which may require deep cleaning, and most of these extensions do not require the customer or supplier themselves to be covered for their own losses.

Territorial limits apply to these terms of extensions.