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Coronavirus and insurance considerations for hospitality business owners

When the government issued a warning to the public that people should avoid social settings, it resulted in many people staying away from pubs and restaurants1. This decision caused criticism from business owners, because to many, this meant they would not be able to close and claim losses from their insurance providers.

However, it is unlikely that hospitality business owners including restaurants and bars will be covered by their insurance policies as the government impose a complete lockdown on the hospitality sector. The Association of British Insurers has issued a statement saying that2:

“Irrespective of whether or not the government orders closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being close by Coronavirus.”

Hospitality insurance considerations

As covered in our Coronavirus and insurance considerations article, hospitality business owners might have some contingent business interruption extensions within their insurance policy, such as notifiable disease and/or non-damage denial of access. However, the wording of both extensions can vary significantly, and whether a policy will cover you, will be dependent on individual circumstances. With regard to legal liability policies, documented evidence of your health and safety policies will be important to the defence of any potential claim.

Government support for hospitality businesses

Instead of solely relying on insurance to help with loss of revenue, hospitality business should keep a close eye on what the government is setting out in financial support for the sector.

As of 23 March, small and medium sized businesses are now able to submit an application for the new Coronavirus Business Interruption Loan Scheme. The scheme means that you will be able to apply for up to £5 million in government-backed finance, providing your businesses’ turnover is less than £45m. For an initial period of up to 12 months, the government will cover any lender fees. Other supportive measures like extended business rates relief and a three-month mortgage holiday for people in financial difficulty has also been made available.

These financial support schemes will run alongside the Coronavirus Jobs Retention Scheme that will provide a grant to employers to keep their employees, rather than make them redundant. Salaries will be paid at 80% up to a maximum of £2,500. These grants will be available by the end of April and between now and then, £30bn of relief has been provided through the deferment of VAT bills3.

In addition, planning rules have been relaxed so that pubs and restaurants can operate as hot food takeaways during the pandemic. This will support businesses with cash flow and help to serve people having to stay at home4.

Measures are also in place for larger corporate businesses. The Bank of England has announced the Covid Corporate Financing Facility.

An information campaign has been launched so that businesses are aware of how to get help. For the full story about this support, visit the government’s website.  

Keeping up to date with the Coronavirus

For our latest news and guidance on the Coronavirus epidemic, visit our resource centre which will be updated daily as the situation develops, so please check back often for the latest material.

If you are a client and have any questions, please contact your usual Marsh Commercial account executive. For everyone else, please use our general enquiry form.

1: https://www.bbc.co.uk/news/uk-england-51929578
2: https://www.abi.org.uk/news/news-articles/2020/03/statement-on-business-insurance-and-coronavirus/
3: https://www.gov.uk/government/news/coronavirus-business-support-to-launch-from-today
4: https://www.gov.uk/government/news/government-to-grant-permission-for-pubs-and-restaurants-to-operate-as-takeaways-as-part-of-coronavirus-response