“No one in Hong Kong would offer business interruption cover due to the outbreak of contagious diseases after Sars in 2003 as some huge claims were paid,” said Glenn Turner, chief operation officer at independent financial planning company Altruist Financial Group. “All insurers and reinsurers withdrew such cover.”

Business interruption policies typically cover losses for property damages arising from fire, flood or other natural disasters. Force majeure, the “hell-or-high-water” or “act of God” clause, is relied upon when a breach in contractual obligations is caused by an extraordinary event.

Government lockdowns and national emergencies tend to be excluded from business interruption clauses, said Daniel Tang, corporate team partner at law firm Withers. During last year’s social unrest in Hong Kong, the success rate for business interruption claims was less than 20 per cent, he added.

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Unless some tailor-made clauses are spelt out, most policies would not pay for such interruptions, according to Selina Lau, chief executive of the Hong Kong Federation of Insurers. “In the case of Covid-19, there is no property damage” to justify any claims, she added.

Some businesses may have “extended coverage” under business interruption policies, despite not involving any physical damage to their properties, according to Tow Lu Lim, a partner at law firm Mayer Brown. This includes denial of access to workplaces or the impact of infectious diseases.

“Depending on the exact wording of the policy, the triggers for coverage are that there must be the closure of the premises by order of a public authority as a result of an outbreak of a notifiable disease,” said Lim. Covid-19 was made a notifiable disease in the city on January 7.

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Companies may still need to prove that losses were due to the government order, rather than underlying impact from the broader economic slowdown, he said.

Before the Sars outbreak, many insurance policies covered for losses due to the epidemic, according to Allan Yu Kin-nam, chief executive of Tahoe Life. Since then, insurers have tightened the conditions, limited payout levels or excluded them altogether, he added.

“It will be more difficult for merchants to get full coverage from the business interruption angle,” said Yu, an industry veteran. “Also, if the closure of businesses is under a government order, it will also mean the insurers do not need to pay.”

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Businesses in the hospitality and entertainment sectors directly affected by closure orders may be able to rely on the clause to suspend or avoid performing their obligations, said Eric Chan, a consultant at law firm Simmons & Simmons.

“That may, in practice, provide little relief to those businesses,” Chan said. “The main impact from the closure order is the loss of revenue, and not the threat of legal claims by the customers for loss of use of the venue, especially in this climate of social distancing.”

In the US, the states of New Jersey, New York, Massachusetts and Ohio are considering forcing insurers to pay the coverage, which falls under policy exclusions. However, it would be a dangerous move to pursue, Tahoe Life’s Yu said.

“It would be against the principle of contract law,” he said. “It may even force smaller insurers to close down as the claims may exceed their financial strength.”

For many businesses, there may be some consolation within the HK$137.5 billion relief package delivered by the government this week, including a HK$80 billion salary payment plan to preserve jobs.