In this bulletin we address an important question: does traditional business insurance extend cover to remote working circumstances?

The so called “new normal” has ceased to be new and is now our standard way of life. Remote working is here to stay. It is now accepted that the Covid-19 pandemic has compelled businesses to do things differently, with physical office spaces closing for social distancing purposes and some remaining closed indefinitely or permanently. Most people have successfully transitioned from working in a traditional office space to their home office, with the exception of employees whose business operations require a physical presence at work.

Given this adaptation across industries, a key concern is security and insurance. Companies which have migrated to full time remote working or alternate between remote and office working are required to review their insurance policies to ensure complete coverage.

A closer look at Business Insurance

The importance of business insurance cannot be overstated and is manifested in various forms of cover, depending on the type of business conducted. It is aimed at protecting businesses from losses and liabilities which are material to survival.

Various types of business insurance may be required:

  • Business Property and Office Contents Insurance: Insurance cover for the business premises of the company and in some instances, the office furniture, against insured perils.
  • Business Interruption Insurance: Not a stranger to the current discourse, insurance cover for the loss of business income or turnover caused by an incident (e.g natural disaster, fire) that hinders the business’ operations.
  • Business Vehicles Insurance: Insurance cover for businesses with a fleet used for the business’ operations.
  • Business All Risk Insurance: Comprehensive insurance cover for assets belonging to the business which are usually worn or taken away from the business premises.
  • Electric and Specialised Equipment Insurance: Insurance cover which typically covers the electric devices and specialised equipment used by the business at its premises.
  • Liability Insurance: Insurance cover, specific or general, which provides indemnity to the business in circumstances where it is legally liable to compensate a third party or client.

The above types of insurance are particularly important when considering business insurance in light of remote working - many of the above are centred on the office or business premises and insure against perils such as damage, data breach, fire, theft or natural disasters at the premises.

Business property insurance cover normally extends to the equipment that employees use to render their services, the so called ‘tools of trade’. Depending on the type of business, these tools of trade include equipment such as laptops, mobile phones and other portable technological devices used for work. As the owner and policyholder, the business retains the insurable interest in these items despite placing them in their employees’ hands.

Electric and specialised equipment cover is normally territorial. That is, cover is usually limited to the primary or main location of the equipment. For example, electronic devices such as computers are insured for risk while at the office. Given that the cover is limited to the business premises or the territory defined in the cover, the cover is not extended to any other location. The risks associated with such a cover are apparent in circumstances whereby employees are now utilising their tools of trade in a different territory from that defined in the insurance policy. This creates a potential problem for businesses: tools of trade may not be covered by business property insurance when utilised by employees remotely.

A misconception that might arise is that these tools of trade would be covered by home contents insurance if the risk materialises whilst at home.

Where does Home Contents Insurance fit in?

Home contents insurance, much like any other type of policy cover, is tailored for purpose. That is, it mainly provides cover for insurable interests in the form of typical domestic items such as furniture, appliances or other valuables that may be listed therein. Home contents insurance would not cover property belonging to another party (such as an insurer). Thus employers must ensure that their property remains insured from wherever location it is used from.

In any event, where items are not clearly defined and included in a policy, they are not covered.

Addressing Potential Risks and Adapting your Work and Insurance Cover

This gap in cover exposes businesses not only to theft or damage to tools of trade, but broader issues related to cyber security. The theft of a work laptop containing confidential information and the intellectual property of a client and of the company poses security, financial and reputational risks. Two main types of liabilities arise from such a scenario: stolen company property and material data breach. While one cannot certainly prevent such from happening, a business is best placed to deal with it when it is insured for such liabilities.

Furthermore the gap in cover exposes businesses which have incorporated remote working to perils which are covered only for office working environments.

The highlighted gaps are material and if left unattended, may expose a business to huge risks that may impact on its existence. What this requires is for businesses to undertake an extensive review of their existing policies to realign to the new work environment. The terms of the existing policies must be reconsidered, given that they may have been premised on a specified territory.

What happens when risks such as damage, loss, data breach or even employee health and safety issues occur outside the covered territory? The answer: an extensive policy review of existing business insurance policies to ensure that sufficient cover is afforded to remote working premises either by an extension of existing insurance cover or the conclusion of new insurance policies.

Put simply, consider how your business operations have transformed since taking cover to close the uninsured gaps.