To Insure or Not To Insure Plus Planning the Comeback – Questions From Our Clients During the Lockdown

Hi, hope you are all continuing to stay safe and well.

While we all absorb the guidance as to how the journey out of lockdown will look, this update is focused on the issues that we’ve been asked most about in terms of keeping business management going in the lockdown environment. We’ve looked at 2 of these this week, the issues around Business Interruption Insurance and general guidance about opening the workplace up.

What’s the position with Business Interruption Insurance?

Business interruption (“BI”) insurance  is often included in business or property insurance policies is a section of cover that has come under a lot of scrutiny over the past few weeks. The point of BI insurance is that it looks to cover the loss of income that results from an interruption to a business due to property damage caused, for example, by a fire or flood.  As a result, most policies will not include cover for loss of income caused by the ongoing pandemic.

However, some types of BI insurance do provide cover for loss of income due to closures that result from other reasons. These can include items such as infectious diseases, prevention of access (where this has not been caused by any damage), and public authority closures/restrictions.

The Financial Conduct Authority has acknowledged the widespread concern about both the lack of clarity in BI policy wordings, and how insurers have rejected BI insurance claims. On 15 April 2020, the Financial Conduct Authority set out its expectation that insurers must seek to agree, process and pay successful claims as swiftly as possible, using interim payments if appropriate.

It has also announced on 1 May 2020 that it will get a judicial declaration to resolve contractual uncertainty regarding the meaning and effect of BI insurance. It has also contacted several insurers asking them to clarify their position on their BI insurance wordings.

The Association of British Insurers has estimated that 75% of the £1.2 billion its members are anticipated to pay out for claims relating to COVID-19 will be for BI.

If you think you are covered by BI insurance, you must notify your insurer (either directly or through the broker), but please do so as set out in the notification clauses in the policy. If you don’t follow the processes in the policy, it could result in a denial of your claim. Our advice would be that if you are in doubt about cover, do notify anyway.

Most businesses have found though, that their BI insurance does not cover them for loss of income resulting from COVID-19, or their insurers decline cover and reject their claim. The 2 primary options here are either via litigation through the courts or, if the policy provides, arbitration. It is worth noting though, that in certain circumstances, a business that qualifies to do so can make a complaint to the Financial Ombudsman Service if its insurer denies its claim. If successful, the decision is binding on insurers (but not the insured).

Eligibility for a business is that they must:

  • have an annual turnover of less than £6.5 million;
  • have a balance sheet total of less than £5 million, or employ less than 50 employees; and
  • must contact the Financial Ombudsman Service within six months of the insurer’s final response.

The limit of compensation that can be awarded is £350,000 and there are no costs issues unlike litigation or arbitration. Please note though, that if a business accepts an award it cannot then subsequently pursue the insurer in litigation.

How do we plan a safe return to the workplace?

We have all had guidance from the government as to how this looks and one thing seems certain, physical distancing for the moment is here to stay and businesses need to start thinking about how to manage the return whilst maintaining the health and safety of their employees. There is no magic solution that will work for all businesses, but the following areas include those we are advising you to focus on.

  • Monitor official guidance: keep this under close and careful review as it develops, particularly around workplace health measures. The government has already issued sector-specific physical distancing guidance for certain types of workplaces (including factories, retail and transport) and further guidance for these and other workplaces is expected.
  • Conduct risk assessments: Any such assessment should always cover all key risks involved in returning to the workplace, including any risk presented by reduced staffing levels and operational changes necessary to implement physical distancing. The assessment should then set out what action will be taken to mitigate any risks identified in it. For example, this include the business deciding whether certain activities are necessary for the business to operate or if they can be temporarily suspended.
  • Help support safer travel arrangements: This might include allowing cycling/walking to count towards the working day, staggering the start and end of the working day to reduce flow during peak hours.
  • What employees do you need to return to the workplace?  If you can, is it possible to maintain home working arrangements? Real care  will need to be taken around staff who develop or live in a household with someone who develops symptoms of COVID-19. Another category of staff to consider carefully would be those in vulnerable groups. Examples include keeping smaller teams of workers together and reducing physical meetings to minimize transmission risk.
  • Adapt the workplace: Take steps to enable physical distancing in the workplace. This has been trialed already by supermarkets and includes controlling access to small or confined spaces and common areas such as toilets and kitchens, rearranging work environments to maintain a 2 metre distance, minimising face to face working, using a one-way system for entrances and exits and reviewing ventilation systems to reduce the spread of airborne particles. Businesses should also consider hygiene arrangements such as increasing availability of handwashing stations, hand sanitiser, anti-bacterial wipes, tissues and increasing the frequency of cleaning with extra focus on contact ‘hot spots’ such as door handles. You  should explicitly remind all staff to maintain good personal hygiene practices, including regular hand washing. Please note that PPE (including face masks) is not currently legally required in the UK, but businesses may consider on the back of an appropriate risk assessment,  proving PPE to staff. If so, they must look at providing training to staff to effectively use the equipment provided and make sure used items are safely disposed.
  • Monitor for illness: Businesses must have processes in case someone in the workplace is potentially infected and should remind staff to only come into work if they are well and not experiencing any symptoms. Remember that any testing methods, such as temperature controls present data privacy issues and should only be implemented with appropriate legal advice.
  • Update your key policies: These would include sickness, health and safety and disciplinary policies and employers should also consider if any new policies are required. As well as this, businesses should ensure that all current health and safety requirements are complied with (for example, maintaining appropriate numbers of fire marshals and first aiders on-site). The Health and Safety Executive (HSE) must still be notified of any workplace incidents that lead to exposure to COVID-19 and any cases where there is “reasonable evidence” that it was caused by exposure in the workplace.
  • Put in place processes to manage legal claims: Business should already have legally required employer’s liability insurance in place which will cover occupational disease, but should consider putting in place processes to manage any claims from employees alleging to have become ill as a result of returning to the workplace.
  • Regularly review the policies that have been put in place to ensure they remain effective:  Businesses should be prepared to reverse measures in the event of a ‘second wave’ of infections.

Any lack of workplace planning could result in unnecessary health risks and liability (including criminal), the key as always will be communication and engagement with staff will be key to ensuring that employees feel supported and that their needs are being looked after. Please contact our expert, Lucy Churchill on any aspect of HR or employment matters for any guidance on the above.

Stay safe and well.