Coronavirus and insurance - what can you do?

12 Mar 2020
The government has tightened the recommendations for private companies and now strongly urges that no more than 100 people gather indoors and that nightclubs, bars etc. stay closed for some time. The prohibitions are expected to be adopted today, and after urgent treatment in the parliament, they are coming into force from next week (week 12). In this article, you will get an overview of Corona-related issues from an insurance law perspective.

Is the operation loss covered by business insurance?

The above measures are expected to result in loss of revenue and other operational losses to many companies. Therefore, there is a good reason to investigate whether the company's losses are covered by the insurance.

The Insurance Contracts Act does not regulate the above issues. For that reason, the decisive factor is the company's insurance policy and terms. It is important to point out that not all company insurance policies cover operating losses. As such, the first thing companies should do is to investigate what kind of insurance the company has taken out, e.g. whether there is an operating loss insurance, All Risk or something similar.

Be aware of exceptions in the insurance terms

Although a relevant loss-of-life insurance has been taken out, it does not necessarily mean that operating losses due to public injunctions or the like are covered. Many insurance companies have explicitly exempted losses or increased losses due to public injunctions, prohibitions or the like.

Some insurers may offer operating loss coverage for a limited period, e.g. for 3 months, while other insurers completely exclude operating losses due to government injunctions and bans.

Special terms/extensions of insurance coverage, e.g. epidemic loss

In some cases, special terms may be agreed in the company's insurance policy. This may be the case if the company has wanted to cover a specific risk in relation to taking out the policy. Such specific terms will typically appear in the policy and not in the insurance terms.

In some policies for instance, it can be agreed that the insurance is extended to cover “epidemic losses”, which does not necessarily mean that ordinary operating losses, including loss of revenue, are covered by the insurance. Typically, losses that are covered as "epidemic losses" will be specifically defined.

It is also important to note that special extensions of the insurance may be subject to "sublimits", i.e. limited amount on the specific coverage in question. There can be a significant difference in whether losses are covered “all the way up” to the maximum insurance coverage amount for an insurance year, or whether the coverage is a smaller amount.

These "sublimits" usually appear in the first few pages of the insurance policy, but it also makes sense to check out the specific sections of the insurance terms that apply to the coverage in question.

Public compensation scheme

The government has proposed a public compensation scheme for organizers of major events that are cancelled, being postponed or substantially changed because of the government's call to cancel events with 100 participants or more due to coronavirus.

According to the proposal, the compensation scheme covers loss of income from a variety of sources, e.g. revenue from ticket sales, fees to artists, sales of food/beverages and merchandise, advertising revenue, etc. Although, it is assumed that the compensation does not result in a profit and that the loss is not covered by the company's own insurance policies.

So far, the notified scheme does only apply to organizers of major events in the period from 6 March to 31 March 2020.

If you are the organizer of a major event, we recommend that you show restraint in the forthcoming months, and that you are already considering possible actions that can reduce your anticipated expenses, e.g. by postponing the events and alerting the customers well in advance.

The Danish Business Authority has created a subpage on its website with information for companies on coronavirus in Danish which include a Q&A on the above compensation scheme that is constantly being updated.

claims of compensation against the State?

Given the uncertainty that many companies are facing because of the public coronavirus measures, it is relevant to consider whether companies that are suffering losses from public injunctions can raise claims against the state.

The Epidemic Act gives the authorities the right to forbid public events from taking place. Moreover, there are extensions of powers under the Epidemic Act, which are just now being urged by the parliament.

The proposal for the new epidemic law – which is expected to be passed by the parliament today - comprise provisions for compensation based on expropriation considerations.

The proposal for the new epidemic law states that the government's assessment is that the proposed prohibitions will not be in the nature of expropriation - but does not deny that there can be expropriation in any case with consequent demands for full compensation.

In most cases, claim for compensation against the State should be based on the general principles in tort, i.e. require a basis of liability, causality, documentation of losses, compliance with loss limitation, etc. In this context, it is expected that the courts eventually will show sympathy for the government's interventions as public health and safety considerations weigh heavily.

In other words, it is Lund Elmer Sandager's assessment that the State will be able to go far without being culpable. At some point; however, the duration and extent of the public injunctions are no longer proportionate thus the responsibility of the general principles of tort law.

(Business) Travel Insurance

Most travel insurances cover the cost of treatment and repatriation for illness that occurs during a journey. As a starting point, you will be covered if you get infected with coronavirus during a journey - this applies to most business travel insurances and private travel insurances.

It is important to remember that you must contact the insurance company to arrange the repatriation. The insurance company typically have a hotline for assistance, e.g. SOS International, which organizes the repatriation. If you arrange the repatriation yourself without involving the insurance company, you risk that the insurance company will not cover the costs afterwards.

Moreover, there are several additional exceptions and reservations to be aware of. E.g. coverage of illness that has occurred, known or been diagnosed before travel will typically be exempt from the insurance terms. Also, home or other transport expenses due to fear of contagion will typically not be covered.

Cases that may be in the gray zone are travels to and from countries and territories that change status according to the Ministry of Foreign Affairs official travel guides while on vacation. If you are prevented from returning home due to danger of infection, the insurance will typically cover reasonable and necessary additional expenses for residence and domestic transport. It is again important to be aware of time and amount limitations stated in the insurance terms.

If the Ministry of Foreign Affairs' official travel guide discourages travel, the insurance will usually cover cancellation of the travel with the amount that the tour operator is entitled to get, according to the normal travel conditions.

However, if you choose to travel even though the Ministry of Foreign Affairs' official travel advice discourages travel, the insurance typically will not cover extra expenses for residence and domestic transport if it later happens that you cannot return home.

Many travel agencies are drafting specific guidance on the effect of the coronavirus for travels that has already been booked. We therefore recommend that you contact your travel agent well in advance of your departure.

The situation is constantly developing, and it is important to keep abreast of the above. If you have questions regarding compensation and insurance due to the coronavirus outbreak, please contact Attorney Anders Linde Reislev.

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