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Hiscox Ltd. said in a statement Wednesday that its “core policy wordings” for U.K. businesses do not cover most business interruption claims related to the coronavirus pandemic.
The Bermuda-based insurer issued the statement amid a campaign by small businesses in the United Kingdom that assert that Hiscox small-business policies cover revenue lost due to government-ordered business closures.
The insurer said about 10,000 of its small-business policyholders who bought business interruption coverage have been directly affected by mandated government closures. Like many other countries in Europe, the U.K. government ordered many nonessential businesses to close last month as part of efforts to stem the spread of the virus.
Hiscox said “a realistic disaster scenario” for its net losses from the pandemic, primarily from event cancellation, entertainment and travel would be $175 million.
The statement came several days after various small businesses began a campaign to pressure Hiscox to pay business interruption claims citing clauses in the policies covering “nondamaged denial of access” and “public authority.”
The policyholders say Hiscox wordings vary but many of the policies provide coverage.
According to one retail specialist policy issued by Hiscox, provided to Business Insurance by the Hiscox Action Group, which has about 80 policyholder members, the policy covers an interruption caused by “an incident occurring during the period of insurance within a one mile radius of the insured premises which results in a denial of access or hindrance in access to the insured premises, imposed by any civil or statutory authority or by order of the government or any public authority, for more than 24 consecutive hours.”
And the public authority clause covers “an interruption to your activities” due to access restrictions following “an occurrence of any human infectious or human contagious disease, an outbreak of which must be notified to the local authority,” according to the policy wording.
In general, the policies were not designed to cover lost income arising from pandemics, said Ben Walter, CEO of global retail at Hiscox in London.
“It was never the intent of the policy to cover a systemic risk like a pandemic, but we haven’t taken the decision lightly; the position we’ve taken is based on the underpinnings of solid legal advice,” he said in an interview.
In an earlier statement, Hiscox said the public authority clause relates to restricted access to insured properties and does not cover losses “such as those suffered as a result of the wider economic slow-down following the actions the Government has taken requiring people to stay at home.”
The coverage is triggered following a specific event. “For example, Legionnaire’s Disease which requires the policyholder to notify the local authority and shut access while it is professionally cleaned,” the statement said.
Daniel Duckett, director and chef of Lazy Claire Patisserie in Belfast, Northern Ireland, and a member of the Hiscox Action Group, said in an email that the group is “keen to have Hiscox review its declinations of cover without having to pursue legal options as of yet.”
In a general statement on business interruption insurance coverage, the U.K.’s financial services regulator, the London-based Financial Conduct Authority, said on Wednesday that most small businesses in the U.K. bought basic coverage from insurers that does not include coverage for pandemics.
“In contrast, there are policies where it is clear that the firm has an obligation to pay out on a policy. For these policies, it is important that claims are assessed and settled quickly,” the statement said.
Hiscox share price has been hammered since the start of the policyholders’ campaign, closing at £7.30 on Wednesday, down nearly 30% from last Thursday.
More insurance and risk management news on the coronavirus crisis here.