Has COVID interrupted your business?

We explained about business interruption claims in our blog Business Interruption Insurance COVID-19 on 13 Mar 20

However, many business interruption insurance claims are not getting paid by insurers.

Last year, a test case on Business Interruption (BI) was brought jointly by Consumer Groups, the regulators and Insurers.

In Mid-January the Supreme Court decided payments for COVID-19.

BI was designed to address the losses a business would suffer after, say, its main factory was burnt down.  But, they recognise that a business might be ordered to close for a period by local authorities.

Did it apply for a national lockdown? – the heart of the case.

Three policy wordings were reviewed.

• Disease clauses, not all disease clauses are equal. Those considered included a catch-all phase of a “notifiable disease” (as the government included Covid-19 5 Mar 20). But, some clauses list diseases and so may not be covered by the judgement.
• Prevention of access clauses when a public authority (Council, Police or Fire) stopped employees or customers reaching/using the premises.
• Hybrid clauses, which combine the main elements of the disease and prevention of access clauses.

What did the Court decide?

Although the Business interruption cover is a commercial offering the court took a consumerist approach and looked to give a broader interpretation to the meaning of the words in the policies.

1. Cover is available under a disease clause when there was any occurrence of a notifiable disease within the specified radius of the insured premises (other policies will say “within X miles of the premises”).
2. Prevention of access clauses (and the Hybrids). The court ruled that insureds have cover even if the ordered closure was not enforceable by law but were “mandatory” instructions. If you could reasonably feel they had no choice but to close.
3. If a distinct part of the business was effectively shut down, then a claim for losses arising from that part was allowed.

One of the tricky aspects of BI claims is to prove that the event that closure actually caused the losses. The court again took a less strict approach.

It is sufficient to prove that your business interruption was a result of government action in response to at least one case of Covid-19 case within the geographical area covered by the clause.

What next?

The judgment is binding on the insurers in the case but will also influence similar policies which must be assessed under “treating the customer fairly” regulations.

The regulators have instructed all insurers to:

1. Review and revisit all potential claims (including those rejected or adjusted before the judgment) and deal with any complaints.
2. Inform their policyholders promptly of the outcome of their assessment.

What do you do if you think you are affected?

If you have BI cover speak to your insurer and ask for an update!

Initial reports in the papers are that it is still a slow process!

So, if you’re in financial difficulties and have a claim, speak to your brokers if you unhappy or need advice.

Remember too you have a right to complain to the Financial Ombudsman (the contact details are in your Policy Schedule and Wording).