Insurance risk considerations during Coronavirus restrictions

Last updated: 30 September 2020

 

By now, many businesses will be operating remotely.  We all understand the importance of washing our hands and isolating unwell staff, but there are implications that remote working may have on your insurance.

 

This information is to be used as a guide only and your policy terms and conditions will always prevail.  It is unclear whether insurers will choose to relax the terms and conditions of their policies so it is assumed that all terms and conditions will apply in their current form.  This information is to be used without prejudice and without liability. 

 

 

Employment Practices Liability

As a business that employs staff you are at risk of Employment Tribunal actions. It is important that you have cover in place to protect you for awards made against your business along with cover for legal costs incurred throughout the tribunal process.

It is often stated that the best way to manage risk is to prevent claims occurring in the first place. This is true with employment matters, as any business that employs staff is exposed to potential employment actions. Where a dispute arises between Employer and Employee there will usually have been an opportunity to address the issue via an internal grievance policy. Therefore, as a pre-claim protection it is important that you have good internal processes including a robust grievance process and have access to appropriate HR support and/or legal professionals where specialist advice becomes necessary.

If a situation does result in an Employment Tribunal, then an Employment Practices Liability policy will protect your business against awards held against your business along with what can be significant legal costs incurred in arriving at a final conclusion.

Statistics show that the average award is in the region of £15,000. A recent claim that was settled for one of our insureds resulted in a low award of £1,000 due to what was considered a weak argument presented by the complainant. In contrast to the low amount of award, the defence costs incurred were £19,000.

We recommend that all businesses have in place good pre-claim risk management processes backed up by Employment Practice Liability cover.

Commercial Legal Expenses

As a business that employs staff, you are at risk of Employment Tribunal actions. It is essential for a business to follow fair procedures and fully comply with legal obligations when handling disciplinary, performance, dismissal or redundancy matters.

Commercial Legal Expenses policies provide dedicated helplines staffed by legal professionals who will guide you through the correct actions you should take when employment issues arise.  As long as you follow the advice, the policy will provide cover for awards made against your business along with cover for legal costs incurred should an employee pursue an employment dispute or tribunal action against you.

Important: Many Commercial Legal Expenses policies will have a condition that requires you to consult the helpline before commencing any dismissal or redundancy procedures. Failure to do so could mean your insurer will not provide cover if an employment dispute subsequently arises. Please check your policy documentation carefully to see exactly what your insurer requires you to do. The policy documentation will also show the helpline number you should call.

Motor Insurance 

Cover implication

Some insurance policies will only provide cover for the contents of a vehicle, such as tools, while it is stored in a locked compound.  This may have been the case during normal conditions, but as a result of staff working remotely, this may result in vehicles being stored at different locations.

If cover for contents within a vehicle is contingent on certain security parameters, cover may be removed in the event of this breach.

 

Our advice
  1. Review the security condition on the policy to establish requirement
  2. Consider the removal of items from the vehicle to the business premises
  3. Ensure contents/stock cover under the Commercial Combined policy is sufficient to cover stock that is now on the premises
Cover implication

When the policy was created, your underwriters may have been told that all vehicles are stored securely overnight within a locked compound at the business premises.  Whilst it may be unlikely that a policy condition insists on this, it may be deemed a change of a material fact if all vehicles are now stored elsewhere overnight, particularly if this is now on a public street where the benefit of a secured perimeter is no longer in place.

Underwriters may consider this a ‘change in circumstance’ and some policies include a condition that requires the policy holder to inform the underwriter if there is a ‘change in condition’.  Failure to do this can reduce or remove policy coverage.

 

Our advice
  1. Check your policy wording for a ‘Change of Circumstance’ condition
  2. Inform your Aston Lark contact, your alternative insurance broker or insurer that vehicles are now stored elsewhere
Should I SORN my vehicles?

During this period of interruption, many of our clients’ vehicles may not be in use and, as such, we are likely to be able to negotiate reducing cover to a Laid-Up basis with insurers. However, there are several things you should consider when deciding whether or not to SORN (Statutory Off Road Notification) your vehicles and take them ‘off the road’ and therefore stop taxing and insuring them:

  • It is a legal requirement to have a minimum of Third Party insurance cover on all registered vehicles and, as such, Laid-Up cover can only be considered for vehicles that have been SORN
  • Where are the vehicles going to be kept whilst SORN? They cannot be left on the road or a driveway. Vehicles must be kept in an enclosed or locked compound or building
  • Who is in control of the vehicles? If they are kept in the employer’s premises and the employer holds the keys, then it is safe to assume that the vehicle will not be used under any circumstances. However, where an employee retains the vehicle in their own garage, there is a risk of the vehicle being used in an emergency situation without the employee considering the insurance cover that applies. This could end up with the driver receiving a fine and an IN10 conviction, and the employer receiving a fine under the MID and being liable for any costs should an incident occur
  • Once SORN, when the vehicle is required again, whilst it may appear a straightforward exercise to re-register a vehicle and reinstate Comprehensive Insurance Cover, there are rules that apply. It is therefore vital that you check the situation that will apply to you before taking the SORN option. For example, according to the strict letter of the law, commercial vehicles cannot be just re-taxed as they need to be inspected beforehand, and whilst inspection for vehicles that have been on the road continuously has been relaxed, if a vehicle is put on the road “new”, the inspection has not been relaxed so in theory they cannot legally just be put back on the road

For this reason, many operators have decided not to SORN their vehicles during this period of interruption as they want to be able to put them back on the road as soon as it is practical for their business to do so, and do not want to wait for what could be a lengthy process of having their vehicles inspected before being able to use them again.

Some operators believe that VOSA will not enforce the re-inspection of a returning vehicle and, whilst this may make sense given the circumstances, the rule has not been officially relaxed and therefore we should assume that they will enforce the rules. Naturally, some insurers are more generous in their reductions in premiums for Laid-Up cover than others, so it is always worth checking with them first.

Cover implication

During this period we have seen a benevolent attitude from clients offering help to key workers, such as the temporary lending of motor vehicles. 

This can have implications on your policy coverage and, without authorisation from your broker or insurer, you may have no cover.

 

Our advice
  1. Inform your Aston Lark contact or your alterative insurance broker of any intention to change the usage of your motor vehicles
  2. Obtain confirmation from your insurer / broker that insurers have accepted this change in risk
Cover implication

Some insurance policies may have a restriction to the amount of agency drivers you can employ. During this period we have seen an increase of agency drivers being employed due to permamnent staff being unable to work. This can have implications on your policy coverage and, without authorisation from your broker or insurer, you may have no cover.

 

Our advice
  1. Inform your Aston Lark contact, your alternative insurance broker or insurer if you are now using Agency Drivers or have increased your use of them

Commercial Combined Insurance

Cover implication

Many insurance policies include an ‘unoccupancy condition’.  The effect of this is that insurers may:

  1. Restrict cover in the event that a property is ‘unoccupied’
  2. Impose conditions that you must comply with, such as undertaking mandated site inspections, or altering the normal flow of services

Failure to comply with this condition may result in cover for perils such as theft, malicious damage and water damage being removed.

Most insurance policies will deem any consistent absence at the premises for more than 30 days as being unoccupied. 

Some insurers have temporarily altered their unoccupancy requirements, so we recommend speaking to Aston Lark to clarify the position on your policy.

You should also heed UK Government advice regarding any travel.

 

Our advice
  1. Speak to your Aston Lark contact to understand the requirements of your policy
  2. If you are not a client of Aston Lark, contact your alternative insurance broker, or contact us to help review policy wording for the unoccupancy condition and the implications thereof
  3. Notify Aston Lark, or your alternative insurance broker, as soon as you become aware of any damage at your premises
  4. Establish a Dormancy Checklist that adheres to the unoccupancy condition and publish this to local managmeent and insurers to demonstrate pro-active risk management 
  5. For a guide on how to protect your premises, click here
Cover implication

Most insurance policies contain a ‘stock in the open’ condition within the policy. Typically, this restricts cover for stock that is in the open.  Perils such as theft and storm damage may be removed.

Consideration should be given to deliveries as well as stock within yards.

 

Our advice
  1. Review policy wording for stock in the open condition and compare against actual risk
  2. Make alternative arrangements for stock to be secured within the property
  3. Ensure main policy limits for stock or materials is sufficient to cover increased limit
  4. Arrange for deliveries to be collected and stored within the property
Cover implication

Lone working should be avoided wherever possible.  Injuries to isolated staff could result in the delay of assistance. 

Not only can this have a direct impact on your workforce, but it could result in an allegation of negligent management against the management team.

In this current climate, lone working may be unavoidable, so you should ensure you have considered your position in this area.

 

Our advice
  1. Speak to your Aston Lark contact or give us a call as we can assist you in creating a Lone Working Policy. This will include a checking system to monitor staff.
  2. Ensure the business and management team are protected against legal costs with a Management Liability policy.
Cover implication

Like many businesses, your continuity plan may include several staff working from home.  This will help ensure that staff can continue their duties.  As an employer, you remain responsible for the working environment for your staff.  Injuries to staff from bad seating posture, as an example, could still result in a claim against your business.

 

Our advice
  1. Issue staff with a reminder of sensible working positions and the risks of bad posture
  2. Ask staff to confirm they can use a suitable workstation while working from home
  3. Ensure your work equipment is correctly insured.  This can be done through your business insurance if the items belong to the business.  Speak to your Aston Lark contact or your alternative insurance broker to ensure these items are covered
Cover implication

Many insurance policies contain obligations on the policy holder when it comes to notifying insurers of a claim.  Some conditions include a time limit.  For example, you may be required to notify an insurer of a malicious damage claim ‘immediately’. Failure to comply with this condition, may mean you are unable to claim an indemnity under this insurance policy.

Visiting your premises may not be an option at this moment in time due to travel restrictions imposed by the UK Government, so there is a danger that this condition will not be complied with.

Here at Aston Lark, we have petitioned insurers to employ flexibility around these types of conditions, but for now we must work on the basis that they will still apply.  If you are unsure of the requirements under your own policy, please contact your Aston Lark account handler and we will discuss this with you.

 

Our advice
  1. Ask your Aston Lark contact or alternative insurance broker to review your policy and establish the requirements of your claim notification condition(s)
  2. Advise your management team of the requirements of the condition
  3. Link the requirements under this condition to your Dormancy Checklist

Cyber and E-Commerce

Cover implication

Businesses that rely on revenue through their website should consider the implication of a denial of access to their website, whether this be via a denial of service attack, or cyber damage.

Your cyber insurance must include a business interruption extension because your standard business interruption cover under your Commercial Combined policy will only respond to losses to income as a result of physical damage, rather than a cyber-attack.

Unsupported or unpatched software may result in cover being denied by some insurers.

 

Our advice
  1. Review your existing cyber insurance for existence of business interruption extension.  Obtain cover if not included
  2. If you have none, or unsuitable cyber insurance is in place, obtain quotations

Visit the Cyber Risk Protection page for more information about cyber risks and risk management.

Fraudulent Crime

Cover implication

Attempts to defraud businesses are present, but businesses may be more susceptible to fraud with the current and future restrictions of movement.

Under normal operating conditions, you may have robust and resilient techniques to mitigate losses – such as requiring dual signatories on cheques or online payments. 

Businesses may become more reliant upon email or telephone requests for payment which can create an increased risk of fraud.

 

Our advice
  1. Review internal procedures for money handling and transactions in this new environment
  2. Consider your crime insurance protection.  You may have limited theft by employee cover, but this should be reviewed against the risk of loss
  3. Obtain a quotation for crime insurance for management consideration

 

Note that a cyber policy will only respond to theft where a breach of your network has occurred.  You may not be covered for fraudulent emails from external sources where your network has not been breached or, for example, telephone fraud.

Management Liability

For further information, additional resources or to discuss any of the above, please don't hesitate to get in touch with your usual Aston Lark contact.

Additional resources include: Dormany Checklist, Business Continuity Planning Toolkit, Crime and Fraud Exposure Calculator, Proper Computer Workstation Position infographic, Workplace HSE  Guide to Lone Working,  Protecting Workers from Coronavirus, Managing Risks for Directors & Officers, and a guide to protecting unoccupied properties.