What is business interruption insurance?
This type of insurance covers businesses for loss of income/revenue (dependent on your policy terms) for periods when the business was unable to trade as usual due to an unanticipated event.
What does business interruption insurance usually cover?
Usually, a claim is made in respect of Business Interruption based on events such as floods, fire, storms etc, these are known as the insured perils. Policies can also provide extensions to cover non-damage related perils, such as disease and forced closure of premises. However, the coverage is specific to your policy wording and any limitations that may be included.
Have you been denied a claim on your business interruption insurance?
Insurers have taken a robust approach to date in respect of rejecting claims for business interruption caused by COVID-19. However, in light of this, the Financial Conduct Authority (FCA) issued proceedings under the Financial Market Test Case Scheme against 8 insurer defendants. In these proceedings, the FCA stood in the shoes of policyholders and represented the policyholders’ interests.
The insurers party to these proceedings were:
- Arch Insurance (UK) Limited
- Argenta Syndicate Management Limited
- Ecclesiastical Insurance Office PLC
- Hiscox Insurance Company Limited
- MS Amlin Underwriting Limited
- QBE UK Limited
- Royal & Sun Alliance Insurance PLC
- Zurich Insurance PLC
The test case was brought to determine the validity of insurers denying business interruption claims for losses sustained as a direct cause of the COVID-19 pandemic. The test case has been appealed to the Supreme Court and Judgment was handed down on 15 January 2021. You can view our comments on the Judgment here; however, in brief, it has been held that the insurers were largely wrong to deny liability under their policies with explanations being provided as to the interpretations of certain clauses.
Following the test case, some other insurers have also notified the FCA of potential liability under the policies where the wording is the same or similar to those policies considered in the test case. This is good news for policyholders as it has shed some light on possible interpretations of policy wordings. However, the test case was not intended to cover all possible disputes relating to business interruption claims but to resolve key contractual uncertainties and address issues of causation in order to provide clarity for policyholders.
On a very general basis, policies which contain “Disease Clauses” are probably most likely to be covered for losses linked to the COVID-19 pandemic, particularly those with open-ended definitions of disease and illnesses. Whereas policies which contain “Prevention of Access” or “Hybrid” clauses may have more difficulty in recovering losses linked to the COVID-19 pandemic, as they are often linked to physical damage events.
Can I make a claim?
Unfortunately, there is no blanket answer. It is very much dependent on the wording of your policy and if you have suffered losses as a result of the COVID-19 pandemic. Any claim will always be very fact-specific even where businesses were forced to close or partially close. However, the interruption does not necessarily mean that there had to be a complete cessation of business.
In order to provide you with a substantive view as to whether your policy does cover your potential losses, we would need to review your specific insurance documents and policy wording.
Can my insurer argue that I may have suffered losses anyway?
One of the arguments put forward by the insurers within the test case was that the value of losses could be discounted in any event to reflect the downturn that would have been suffered in any event because of the wider COVID-19 on trade. This position was rejected by the Supreme Court and it was held that “losses should be assessed on the assumption that there was no COVID-19 pandemic”.
Therefore, any discount for losses cannot be connected in any way to the effects of COVID-19.
Why use Flint Bishop?
Our dispute resolution solicitors have a strong history of dealing with insurance litigation especially in claims involving business interruption. We work to achieve settlement as early and on the most beneficial terms possible. However, if court proceedings are also required, we offer robust and strategic advice throughout the case in order to achieve the best possible outcome for you.
We can also source the appropriate third-party assistance such as forensic accountants in order to assess and report on your losses and any consequential losses.
We can offer a full service above and beyond that which a claims management company or loss adjuster can offer as we bring a wealth of experience in litigated matters.
We offer many different possible funding options which can be considered with you once we have basic information about your case and we have carried out an initial review of your case.
If you are interested in making a claim, please submit your details using the form above and we will get back to you to discuss your case and possible funding options.