With many businesses having to shut their doors due to the ongoing restrictions imposed due to COVID-19, there is little doubt that many will be concerned about the significant financial impact of this global pandemic on their bottom line. In times of such uncertainty, many have looked, or will look, to their business interruption insurance policies in the hope that these losses can be recovered.

However, recent news reports suggest that insurance companies have adopted a blanket rejection of all business interruption claims,. It has been rumored that brokers accept this stance as prima facie and advise their clients that they are not covered.

While it will inevitably be the case that a large portion of businesses will not be covered, there is little doubt that there will be many companies and sole traders around the country who are either expressly or implicitly covered by their business interruption insurance. In times of such uncertainty, what is absolutely sure is that the general principles of contract law, and not the decision of an insurance company, will decide if a business is covered under a business interruption insurance policy.

The contra proferentem rule

The contra proferentem rule is a legal doctrine in contract law thatbroadly states that if there is any ambiguity or doubt aaboutthe meaning of a particular clause in a contract, the words will be construed against the person who drafted the contract or insisted on its inclusion. Since insurance companies generally recruit the policy/contract, any ambiguous terms, phrases, or clauses will be generally read against them and in favor of the insured.

Whileevery policy is different, we at O’Brien Murphy Solicitors have already come across severalicy wordings that we believe quite clearly provcoverthe current circumstances. These include pretty explicit clauses that consist of words such as ‘restrictions or closures imposed’ by a ‘public,’ ‘local’ or ‘government authority,’ due to ‘an occurrence of a notifiable human disease,’ or more implicit clauses that, due to the contra proferentem rule, might be read as providing cover during this period – an example of this might be in the form of a ‘prevention of access’ clause.

Next steps

The scale of the current health crisis will inevitably result in many insurance coverage disputes over the coming months and years. To minimize exposure to expensive litigation and maximize the prospect of recovery under an insurance policy, businesses can take several simple steps. The first step is to engage a competent solicitor who will review the relevant business interruption policy document and provide expert legal advice and opinion on whether it covers the effects of COVID-19.

If there is a potential insurance claim, the insurance company will need to be notified of such a claim. Other provisions within the policy document will also need to be examined so that any necessary action outlined within the policy can be complied with. For example, it may be a requirement to mitigate the loss.