Covid-19 is clearly an unprecedented situation and one that is incredibly fluid and will undoubtedly continue to change in the coming days, weeks and months.

Despite the recent assurances from the government, we are continuing to see and expecting ongoing resistance and/or lack of clarity from insurers regarding business interruption claims for consequential loss, despite the recent assurances from the government in its daily briefings.

Business interruption cover for bars, pubs and nightclubs

Typically, in the UK and rest of the world, physical ‘damage’ needs to occur before business interruption insurance cover is triggered; this also known as the ‘material damage proviso’. A voluntary or mandatory closure as prescribed by the UK Government is typically not covered by most policies due to the lack of ‘damage’. Please see the full statement from the ABI.

We are investigating legal theories that may exist to find coverage, although the stance currently is that it is unlikely a policy will respond on this basis.

However, Covid-19 is unprecedented and the financial and nonfinancial impact, to a large extent, remains unknown. Therefore, whilst the support measures offered by the UK government (including the government-backed coronavirus business interruption loan scheme) are welcomed, they may well decide in the future to take this a step further and compel insurance companies to grant policy coverage in some shape or form.

Alternatively, the UK government may well provide further direct support to UK businesses. 

Tips for pubs, bars and nightclubs to cope with Covid-19

Given the current uncertainty, we suggest the following practical steps:

• Keep accurate financial records during the time in case the UK Government introduces future initiatives to recompense or support
• Contact your local MP to request that, given the uncertainty surrounding insurance coverage, UK Government takes action to support UK businesses
• Remain vigilant regarding situation updates and heed UK Government and other guidance regarding the health and safety of your employees
• Remember to keep us informed on any material changes to your business e.g. change of use to food takeaways/delivery service
• If your premises will be unoccupied until further guidance, please confirm this to us
• Unless we advise agreed changes, please remember to continue to adhere to all policy terms and conditions such as security conditions or warranties and advise us immediately should this not be practical
• Ensure business money is banked and games machines are emptied

Business interruption cover claims for pubs, bars and nightclubs

If you have business interruption insurance for your licensed premises, here is some advice in evidencing a loss and/or presenting a claim:

• Keep a detailed log of visitors, which could become useful if the virus is identified on the premises
• Identify and record declining business activity by analysing variances between forecast and actual revenues
• Pinpoint additional costs and unusual costs incurred from mitigation activities and their effect on profit margins, for example cleaning and disinfecting the premises; overtime pay to make up for production losses; and media or communications campaigns to inform the public or employees
• Identify and record potential costs associated with the virus and its business impacts, such as cancelled orders, supply chain breakage, and lost profits. Even if these may not ultimately be covered under current insurance, they can inform future risk mitigation, business continuity planning and management strategies.

The documentation that should be gathered for your insurance claim includes information from suppliers that are unable to deliver on their contracts and/or proof of government-mandated closures.

How we are supporting licensed trade customers during Covid-19

We are lobbying our insurer partners to support and provide concessions, with regards to a number of areas; policy extensions, flexibility and leniency on unoccupancy conditions and seeking clarity around the business interruption cover that may or may not apply to your policy.

We have robust business continuity plans and IT capabilities to handle the increase in people working from home, and the extra calls people will be making too. At times, the lines will naturally be a little busier than usual and we appreciate your patience during these times.
We’re here to help and will keep you informed as further information
is released by our panel of insurers.

Read more about how we are supporting people and businesses during the crisis.

Pub, bar and nightclub insurance from Towergate

See our specialist pub insurance, bar insurance and nightclub insurance pages for more details of our licensed trade cover.

Government support for pubs, bars and nightclubs during Covid-19

The Chancellor has set out a package of temporary, timely and targeted measures to support public services, people and businesses through this period of disruption caused by COVID-19. The package of measures to support businesses includes:

• A statutory sick pay relief package for SMEs
• A 12-month business rates holiday for all retail, hospitality and leisure businesses in England
• Small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
• Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
• The ‘Coronavirus Business Interruption Loan Scheme’ offering loans of up to £5 million for SMEs through the British Business Bank
• A new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans
• The HMRC ‘Time to Pay’ scheme
• The coronavirus job retention scheme which will cover wages up to £2,500 a month, backdated to 1st March
• Deferral of the next quarter of VAT payments for businesses until the end of June
• Self-employed workers will be able to access universal credit payments in full, at a rate equivalent to statutory sick pay eligible to employees.

About the author

Mike Stephens FCII is a respected senior industry professional and Fellow of the Chartered Insurance Institute (CII) with well over 40 years’ varied experience in the commercial insurance sector as a director, underwriter, and operational improvement manager.