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Business interruption insurance: Are you entitled to compensation?
27. März 2020
Is there a claim for compensation when operations are interrupted? If businesses are officially ordered to quarantine, self-employed and freelance professionals are legally entitled to compensation. This option is set forth in the German law on the prevention and mitigation of infectious diseases in humans (Gesetz zur Verhütung und Bekämpfung von Infektionskrankheiten beim Menschen). However, in order to access such compensation, the company must have been officially quarantined in whole or in part by the proper authorities.
Compensation from a business interruption insurance claim?
It is more difficult to establish whether an existing business interruption insurance policy will pay out for damages in relation to the new coronavirus even if no official quarantine measures have been ordered, but merely closures issued by federal states or local authorities have been ordered (as is the case currently for gyms, some retailers and restaurants during evening hours). Because in such cases, coverage for possible damages will depend on the individual contracts.
Business interruption policies based on the standard conditions versions FBUB 2010 and AMBUB 2011 provided by the German Insurance Association (GDV) will often not include protection against infections as an insurable loss event. By contrast, extended coverage building blocks or all-risk policies may include an option for compensation depending on the specific contract.
Epidemics or infectious diseases have to be listed explicitly as an insured risk. If all-risk coverage was agreed there is even a possibility of retrospective damages being compensated. For example, this may be the case if production seizes because of a supplier shutting down.
Insurance Cover for Business Closure Insurance Policies
A business closure insurance policy covers losses from a business closing due to official measures ordered pursuant to the German law on the prevention and mitigation of infectious diseases in humans. This may be in addition to the legal claim to compensation depending on circumstances. Such policies are common in the food and beverage and restaurant industries, hospitals and also in many medical practices. However, media reporting and our own experience show a current increase in cases where insurers will not pay precisely because of the coronavirus.
You should investigate whether a claim to compensation applies in case of business interruptions. If you are prohibited from operating your business in the current situation due to orders from federal states or local authorities (e.g. as a retailer or restaurant owner) and you do have a business interruption or company closure insurance policy, it is certainly worth taking a closer look at the policy. Since the wording may be complicated you should consult a professional.