COVID-19 Insurance Update: 12 June 2020

Our latest thinking into the insurance impacts arising from the ongoing crisis is offered against the Office for National Statistics having confirmed that the UK economy shrank by 20.4% in April, the largest monthly contraction on record. The news of the economic impact of the UK’s lockdown measures came as an increasing number of Conservative MPs called for the current two metre social distancing rule to be relaxed by the government, in order to help businesses as the lockdown process eases. 

It has been reported that Ministers are considering a major overhaul of the UK’s planning system, as part of the government’s economic response to COVID-19. The proposals will reportedly include the introduction of a zonal planning system and the creation of special development zones, in which private developers will have an expanded role. 

Meanwhile, the FCA has confirmed their guidance for insurance firms to consider the impact of COVID-19 on the value of their insurance products. The effects they suggest reviewing, include whether firms can provide expected contractual benefits or if there has been a reduction in the chance of underlying insured events happening due to lockdown. The guidance took effect from 3 June and firms are asked to complete their review of product lines and decided on resulting actions by 3 December 2020.

The government has announced that trade credit insurance will receive up to £10 billion of government guarantees. The Trade Credit Reinsurance Scheme is available on a temporary basis for nine months, backdated to 1 April 2020, and running until 31 December 2020, with the potential for extension if required. The scheme will be followed by a review of the trade credit reinsurance market.

The Corporate Insolvency and Governance Bill passed all of its Commons stages without a division. In his opening speech, Business Secretary Alok Sharma MP emphasised that the Bill will give businesses a fighting chance of bouncing back after the pandemic and outlined that the temporary measures will have the opportunity to be extended by regulations.

The Business, Energy and Industrial Strategy Committee has launched a super-inquiry on post-pandemic economic growth, which will look at the options available to the government to secure the economic recovery from the impact of COVID-19, covering investment, industrial strategy, jobs, skills, exports and sustainable growth. The closing date for submissions on the initial terms of reference is 15 July.

We start this edition by looking at whether COVID-19 could set the first precedent with regard to damages for late payment of claims. Section 13A was added to the Insurance Act 2015 by the Enterprise Act 2016. It added a new duty on an insurer to pay sums due in respect of the claim within a reasonable time, failing which the insurer may be liable to pay damages. Three years later, there are no reported cases dealing with a breach section 13A, but with the litany of disputes arising out of COVID-19, we consider whether the English courts may now be asked to address it.

Turning to the aviation industry, we examine the potential liability exposurearising from the Health Safety Protocol. Published by EASA on 20 May, these guidelines were issued with the purpose of welcoming passengers back on board, while protecting the health of the passengers and airline and airport staff. However, might the reality of being confronted with a large number of sometimes confusing health and safety measures expose stakeholders, and especially airlines, to unwelcome liability issues?

In recent months, COVID-19 has led to a fundamental shift in the way we work. With the rapid development of technology in the past decade, businesses are more equipped than before to support their employees in this “new normal”. However, businesses are also considerably more exposed to the risk of fraud resulting from cyber security breaches and technology crimes. We consider the issue and offer some suggestions for how businesses can protect themselves.

On employment, we look at the tough decisions facing employers once the furlough scheme ends. With one in five British workers currently furloughed, we outline the collective consultation process that employers will need to comply with and suggest that it can be used as an opportunity to test the business case, more widely.

And a final comment. Alongside the need to navigate the impacts of COVID-19, the end of the Brexit transition period is fast approaching; today Michael Gove has formally told the EU Joint Committee that the UK will not extend the transition period. Recognising the impact of the government’s long maintained position, the Public Accounts Committee has published a report outlining its concern that the Cabinet Office will not have the capability to successfully deliver campaign messages on Brexit preparations at the same time as delivering the major public health campaign on COVID-19. The Committee is also concerned that businesses and the public will not have the capacity to act on both sets of crucial messages. 

We hope you enjoy this update and welcome your thoughts and observations.

Links to all articles included in the update:

• Damages for late payment: will COVID-19 set the first precedent?
  
• EASA's COVID-19 Aviation Health Safety Protocol and potential liability exposure for the aviation industry
• Recovery from cyber fraud loss in the COVID-19 era
• Redundancies: Employers face a raft of employment tribunal claims if they fail to consult furloughed employees