Business interruption coverage insurance during the Covid-19 pandemic in Venezuela

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Jesús Escudero
Torres, Plaz & Araujo, Caracas
jescudero@tpa.com.ve

Andrea Cruz
Torres, Plaz & Araujo, Caracas
acruz@tpa.com.ve

Since March 2020, following the World Health Organization (WHO) declaration that Covid-19 is a pandemic, governments around the world have taken action to reduce supress the virus.

The introduction of measures, such as quarantine, have let to conflicts relating to business interruption (BI) insurance and whether there would be coverage of the eventual losses due to Covid-19-related events.

Venezuela did not escape this new reality. In March 2020, the Venezuelan government declared a State of Emergency which is still in force. All businesses considered non-essential have remained closed while those regarded as essential have had their usual commercial activity severely curtailed.

The current crisis has highlighted the fact that, in Venezuela, there is very limited offer of coverages specifically designed to protect insureds from the economic damage caused by business interruption. It is only standard to find coverage for lost profit and some extraordinary expenses relating to the business interruption. Furthermore, these coverages are usually granted when such interruption is due to an event which has physically affected the premises from which the insured operates.

Coverage of the above mentioned lost profit and extraordinary expenses risks are usually offered by insurance companies in Venezuela as an additional coverage included either in an all industrial risk policy, fire insurance policy or anti-theft policy issued to cover risks related to the physical location of a company. Consequently, insurance companies in Venezuela currently only offer business interruption risk coverage arising from physical damage sustained by the insured’s place of business.

To date, according to the information from the Chamber of Insurers of Venezuela (Cámara de Aseguradores de Venezuela) there have been no claims filed by any insured against an insurer regarding losses due to a business interruption caused by the pandemic. However, it would be interesting to study, on a case-by-case basis, whether a Venezuelan-issued policy that includes an additional coverage of lost profit or extraordinary expenses, could provide coverage in such cases.

As in many other jurisdictions, the pandemic itself did not trigger the business interruption. In contrast, the interruption was caused by government measures and, especially, orders issued by civil authorities and imposed to prevent non-essential business from carrying out their normal activity.

Although, as previously mentioned, the Venezuelan insurance market in relation to the business interruption coverage is currently small and, consequently, no claims have been filed, or even a discussion opened on this matter; nevertheless, insurance and reinsurance companies in Venezuela are watching developments of the matter around the world closely.

Apart from helping keep the local insurance market up to date, the legal study and follow up of relevant cases related to BI (eg, the United Kingdom Financial Conduct Authority case, filed before the High Court of Justice of England and Wales) will allow Venezuelan insurance market to: better understand the circumstances and new conditions, products and requirements designed by the international insurance and reinsurance markets; and expand Venezuela’s market by creating new products designed to cover the needs of both insureds and insurers/reinsurers.

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