Espionage, terrorism and disruption: Coverage complexities in an era of uncertainty

Business owners are faced with scenarios today that would have been almost unthinkable just a year ago – or only in Tom Clancy novels from the 1980s. Yet, this year on March 4, Sergei Skripal and his daughter, Yulia, were found collapsed on a bench in the city of Salisbury in Wiltshire. They had been poisoned using Novichok, a nerve agent secretly developed in the Soviet Union, which is one of the most deadly chemical weapons ever created.

Chemical analysis evidence tracing the chemical’s development points to Russia as being responsible for the attack on the Skripals. As the story unfolded, further investigation revealed the following timeline:

• 4th March - Initial uncertainty regarding the cause and location of the  Skripals’ poisoning
• 6th March - Counterterrorism officers take over from the Wiltshire police investigation
• 12th March - Presence of Novichok is identified
• 14th March - Investigation focuses on Mr. Skripal’s home
• 28th March - Conclusion is made that the front door handle was initially contaminated

At this point, eight locations in the Salisbury area were closed due to police investigations. Business owners began to contact their insurers and brokers, asking if business interruption coverage had been triggered. In addition, the attention to the case was causing a dramatic slowdown in foot traffic throughout the business district, and great concern of ongoing damage rose as revenue dropped.

Coverage complexities

The poisoning was initially labeled an act of terrorism but, with reference to the UK’s Terrorism Act 2000, the incident didn’t fit the Act’s description of an action taken by a group in support of an identified cause, designed to influence government or public opinion. While a business owner could easily assume coverage was in place and attempt to claim business interruption losses under this extension, complexity set in; policy wordings covering denial of access due to a disturbance/commotion in the vicinity opened up uncertainty. Ultimately, there was no such disturbance in the actual vicinity – the police denial of access was due to potential contamination within the affected premises, not due to a commotion in the vicinity. The ‘event’ itself took place over a mile away and then, unintentionally, the premises were compromised. Do these circumstances mean denial of access cover doesn’t apply here?

For those businesses visited by the Skripals that day, the requirement for specialist decontamination infers damage. The issue is whether or not the damage is covered by the policy. Contamination is often excluded from policy wordings, albeit such exclusion may be excepted if it results from a defined peril, such as ‘malicious persons’.

Questions raised:

• Did the person(s) committing the malicious act need to do so at the premises to trigger an exception?
• The need for a disturbance in the vicinity to trigger the police denial of access
• Inclusion/omission of a pollution/contamination exclusion
• Loss of attraction is often misunderstood, and renaming that as loss of named attraction might help
• Is a malicious act resulting in contamination being brought to the premises by innocent persons sufficient? If so, how far away does a malicious event need to occur for it not to be covered? Is it a mile, within the county, within the UK?

We now are aware of a second, possibly connected incident in the town of Amesbury. A second set of victims appear to be affected by the poison related to the Skripals in the first incident. One of the victims died and police are investigating, leading to another town and other businesses potentially affected. Surely, the findings relating to business coverage for losses will now apply to this case, as well.

What we have learned

What we know from the Salisbury case is there has been limited denial/hindrance of access due to damage, albeit losses covered under such (damage) extensions will not be significant. As a city, Salisbury cannot be considered an attraction. Damage to a specific property needs to act as the trigger. A general disinclination to visit the city is not an insurable loss.

We also advise business owners to clarify these points regarding their coverage:

• The need for a disturbance in the vicinity to trigger the police denial of access
• Inclusion/omission of a pollution/contamination exclusion
• Loss of attraction is often misunderstood, and renaming that as loss of named attraction might help

Our experts deal with complex coverage issues frequently, and while we can never anticipate the exact sequence of events as are playing out in the Novichok case, we do have the experience to help you ask the right questions and ensure you are ready in the event of your own business interruption or property coverage concerns. We welcome your questions on this case and will continue to offer further observations and exploration of changing expectations in a world where we face business interruption scenarios far beyond those created by water, fire and wind events.