6 May 2020

The impact of Covid-19 will be far reaching than is yet realised.

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A likely area of litigation will be businesses seeking indemnity through business interruption policies. It is likely that, as a matter of economics, given the potential volume of claims caused by businesses shutting down due to the lockdown, insurers will seek to deny liability for losses caused by Covid-19. It is probable that insurers will argue that Covid-19 does not fall within the definition of disease, infestation and defective sanitation interrupting business due to the length of interruption caused by the lockdown and the fact that most businesses did not shut down due to direct impact but because of government action. Indeed government action as currently seen would not have been envisaged when entering the contract of insurance. The likely anticipated scenario would have been local authority temporary closure of roads or districts to accommodate works or civil disobedience. All this points to litigation concerned with the meaning of contract terms to establish liability before quantum is even explored.

That said, businesses are likely to face potential claims under their employer’s liability policies from employees exposed to Covid-19 infection. It will be interesting to see how NHS and frontline staff react to exposure caused by inadequate PPE or operational standards that do not reduce the risk of infection. Employers will do well to seek clarity way in advance on how to resume operations without endangering their staff or exposing themselves to claims.

The above highlights difficulties faced by small businesses providing services such as hairdressing which require physical contact with customers. The potential of clients suing their hairdresser, if they can prove exposure and infection at the saloon/barbershop, place such business operations in particular difficulty that may require an amendment to legislation to exclude liability for exposure to Cover-19 or new operational methods such as the use of testing equipment (yet to be available on the market) to demonstrate infection-free client/customers and hairdresser/barber.

The same issues faced by small businesses is potentially faced by medical practitioners such as GPs who may see allegations of exposure at GP surgeries. Again proving causation – exposure/infection – will be the point of contention for would-be claimants.

Finally, a note of caution. There may be liabilities that occurred prior to the lockdown which the insurer has accepted. Covid-19 now provides an opportunity for the insurer to mitigate loss. An example being credit hire of vehicles by victims of motor accidents. The hired vehicle is often required to travel to and from work and social and domestic use. However given the lockdown, unless hire is by frontline/key staff, the vehicle will not be in use and therefore hire cannot be justified and should be terminated.


The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Connaught Law and authors accept no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please don’t hesitate to contact Connaught Law. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Connaught Law.

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