Insurers may not cover business losses related to Hong Kong’s shutdown orders after lessons from Sars outbreak
- Companies affected by shutdown orders may struggle to win business interruption insurance or force majeure claims against insurers, experts say
- Insurers have tightened on pandemic under such policies after suffering record payout during 2003 Sars outbreak
Companies affected by the Hong Kong government’s shutdown orders during the coronavirus pandemic are unlikely to win business interruption insurance or force majeure claims after a record payout in the past health crisis, experts said.
“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.