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COVID-19: the impact of material changes to your business insurance

Many of our clients, just like ourselves, will have already been advised by the government to close or severely limit aspects of operations, and others will have seen, or will see, a sharp decline in business either as a direct or an indirect result of these recent government announcements. You may even have needed to change your business model entirely, in order to cope with the way that you do business in the present and/or future environment. If you change the manner in which you operate your business, you must remember the need to keep your insurers advised. You have a duty to inform your insurers of material change, and failure to do so could affect the coverage afforded by your policy.

Examples of material changes could include (but are not limited to):
* Changing a business model to work on a delivery basis and/or takeaway rather than a more traditional store-based retail model

* Having employees working from home rather than in an office/retail environment. If this is happening, you still have a duty to risk assess the way that these employees work in order to limit the risk of liability claims. You may also have to amend the sums insured for office contents/computers away from your premises and/or add employee’s premises to the list of properties covered in order to ensure that your business is protected in the event of loss or damage to business assets. Has home working altered the way that your computer network is set up? This could affect coverage under any cyber policy that you may have.

* Unoccupied premises – if you temporarily close your premises, insurers will require that you comply with any requirements of the unoccupancy clause on your policy. This may require that you take additional steps in order to maintain cover and potentially may limit the coverage afforded to you and/or require payment of an additional premium. Generally insurers will invoke an unoccupancy clause after 30 consecutive days, but this period of time can vary from policy to policy. Given the difficulties we are all facing we would expect insurers to be understanding and deploy a pragmatic approach. 

* Remember that you are expected by any insurer to take all reasonable steps to avoid loss. In effect you should act as if you were a “prudent uninsured” – i.e. you need to think what steps you would have taken to avoid a loss if you did not have an insurance policy in place.
Many of the reports in the press in relation to insurance coverage, have unfortunately been misleading or inaccurate, and regrettably some earlier government announcements may have also led some clients to have false hopes about the likely assistance that their insurers can or will provide. The approach taken in response to COVID-19 does vary from insurer to insurer, and can also vary between different policy wordings issued by the same insurer. You must read and ensure that you comply with your own insurer’s, and policy requirements.