Man working behind the glass of his restaurant closed by covid-1
What is Business Interruption Insurance and does it cover Covid-19?

Business Interruption Insurance has hit the headlines recently, for good reason. A recent court ruling now provides hope to the thousands of small businesses that have suffered devastating losses as a result of coronavirus. 

The issues around Business Interruption Insurance and coronavirus are complicated, so before we dive into the details, let’s take a look at what Business Interruption Insurance actually is and what it covers. 

What is Business Interruption Insurance?

Investopedia defines Business Interruption Insurance as:

Business interruption insurance is insurance coverage that replaces income lost in the event that business is halted due to direct physical loss or damage, such as might be caused by a fire or a natural disaster.

Business Interruption Insurance is designed to cover the losses to the business of this interruption to its usual operation. Prior to the coronavirus pandemic, Business Interruption Insurance was often-overlooked by businesses. Many business owners assumed that their existing building or contents insurance policies would be enough to cover losses due to disasters such as fire or flood. In both these circumstances, it is not just the cost of lost stock or building damage that businesses will suffer. 

In the case of flood, for example the business premises might have to shut for several weeks, or even months to dry out and undergo repair. It covers financial losses that are a direct result of that interruption; from loss of revenue, costs of a temporary location, new machinery to the costs of additional staff cover, payroll and wages.

It is important to note that Business Interruption Insurance is often an add-on to existing insurance policies. That means it is important that you check all existing policies to see if they include a Business Interruption clause and what circumstances it covers. 

Checking your coverage under a policy might sound simple enough, but as has been shown recently, the coverage these policies provide is far from straightforward. In fact, the wording of these policies has been the subject of recent court action, highlighting the complexity involved in assessing Business Interruption Insurance claims. 

BOX OUT: There are about 700 types of business interruption policies sold by about 60 insurers, including:

  • Arch Insurance (UK) Ltd
  • Argenta Syndicate Management Ltd
  • Ecclesiastical Insurance Office Plc
  • Hiscox Insurance Company Ltd
  • MS Amlin Underwriting Ltd
  • QBE UK Ltd
  • Royal & Sun Alliance Insurance Plc
  • Zurich Insurance Plc


Business Interruption Insurance and coronavirus

While no business owner could have predicted the outbreak of coronavirus, many felt secure in the knowledge that their insurance policies included Business Interruption clauses that would pay out in the face of such a crisis. 

With the outbreak of Covid-19 and the subsequent lockdowns, businesses have been desperate to claw back lost income. Naturally, they have looked to their business insurance policies to offer a lifeline. However, in many cases claims related to lockdown losses have been denied by insurers, serving a devastating blow to businesses who are still suffering.

The issue of denied claims has been so widespread that in January 2021 a test case was brought to the UK’s Supreme Court to determine whether insurers were making the right decisions. 

In a blow to big insurers the UK court found largely in favour of a group of claimants who had been denied payouts by insurers. Finding against insurers including Hiscox, Arch, Argenta, MS Amlin, QBE and RSA, the court considered the complex wording of numerous policies. The judgement provided guidance to insurers on what policies would and would not cover in relation to coronavirus. 

Small businesses and Business Interruption Insurance 

The new ruling affects some 700 business insurance policies. The ruling means that over 370,000 small businesses now have hope. They are in a position to challenge decisions made on existing claims or submit new claims for losses they’ve suffered as a result of Covid-19.  These include:

  • Cafes and restaurants
  • Cinemas and theatres
  • Nightclubs, gyms and leisure centres
  • Food retailers
  • Pharmacies
  • Businesses offering goods for sale or for hire in a shop
  • Library services
  • Professional service firms
  • Accountants and lawyers
  • Construction and manufacturing businesses 
  • Businesses providing holiday accommodation
  • Nurseries and schools
  • Places of worship


Unfortunately, not all policies will cover losses related to the pandemic and not all policyholders will find themselves covered. What is important is that your specific policy is reviewed thoroughly to determine the strength of your claim. Each Business Interruption Policy is unique and the success of any claim depends upon how the courts have analysed the wording for many specific types of business.

As the Financial Conduct Authority has highlighted, ‘each policy must be considered against the detailed, “complex” judgement to work out what it means for any particular policy’.

If your business has suffered losses as a result of the coronavirus pandemic now is the time to act and seek an expert policy review. If you have had a claim denied, or are yet to make a claim against your policy it is important that you put your best foot forward and have your policy reviewed by an expert insurance lawyer. With support from experts your claim can be positioned in the best possible way to ensure an effective and efficient claims process and ensure that the maximum payout is achieved.