How to... make a business interruption insurance claim for coronavirus
The hearing at the High Court may open the floodgates for a host of similar cases, so check the wording of your policy, says Jonathan Cole
The government-enforced measures introduced as a consequence of the Covid-19 pandemic have caused huge disruption to pubs, restaurants and other hospitality businesses, with the threat of further, more stringent limitations on the horizon.
In the circumstances, business interruption (BI) insurance has never been a more important topic for so many businesses blighted by the events of the year.
In many cases, the insurer's response to a BI claim has been to delay or to refuse to pay compensation. This has caused the Financial Conduct Authority to take action, bringing a test case against eight insurers in relation to 21 sample policy wordings.
The case has been expedited through the courts and was recently heard in the High Court, where many of the policies have been interpreted in such a way that a large number of businesses, who hold BI policies, may now be entitled to compensation by their insurers.
This is a very important development that could affect up to £1.6b of policies, and is likely to provide helpful guidance on the interpretation of similar policy wordings adopted by other insurers.
Seven-step insurance policy checklist
1 Check your policy wording
Insurance policies tend to be long and confusing documents that are difficult to understand. You may think you are not covered for BI insurance when, in fact, coverage may be hidden in a different clause or section of the policy.
2 Understand what your BI clause means
There are a variety of BI clauses written in a number of different terms, but the majority fall into two broad groups. They are denial of access clauses stating that insurers should pay out if something is preventing a business from accessing its premises; and disease clauses stating that an insurer should pay out if the business is closed due to certain infections.
3 Act quickly
If you think that you may have BI insurance and you have suffered a loss, you must contact your insurer without delay to notify them of the claim. Most insurance policies require the insured to notify their insurer promptly of any claim and a failure to do so may result in the insurer seeking to avoid liability.
4 Evidence your loss
If you have a BI policy that responds to the losses you have suffered, then you will want to ensure that you are compensated for as much as you are able to claim. A key feature of this will be explaining and providing evidence in support of your financial loss. This may well require a detailed accounting exercise so, if in doubt, discuss this with your accountant, but do not let this delay you notifying your insurer of the claim.
5 Do not take no for an answer
Like most industries, the insurance industry is reeling from the unprecedented events of this year. You may have been refused a claim by your insurer five months ago, but your policy wording may now be subject to review by the courts and the position may have changed. Speak to your broker or insurer on a regular basis to see if there have been any material changes.
6 Watch this space
There are likely to be a substantial number of legal disputes arising from the fall-out over BI insurance. The Financial Conduct Authority case is likely to be subject to an appeal and there are other group actions being pursued. Keep an eye on the developments in the news, as no one knows what the future holds and how this might affect your BI policy.
Keep an eye on the developments in the news, as no one knows what the future holds
7 Consider your options
A rejection from your insurer may not be the end of the process. Your case may be arguable either way and there may be merit in pursuing a complaint to the Financial Ombudsman Service. You may also want to consider a possible claim against your insurance broker if they were engaged to secure a responsive BI policy and failed to do so.
Jonathan Cole is a commercial litigation solicitor in the dispute resolution team at Goodman Derrick
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