Coronavirus: Business Interruption Insurance FAQs
Last updated 12:00, 7 March 2022
Initially, in the media, it was reported that policy holders were unlikely to receive cover for COVID-19 related losses. For example on 17 March 2020, the headline of this BBC article read:
Coronavirus: No insurance cover for most virus-hit businesses
However, we cast doubt that it was this simple at the time, and the decision handed down by the High Court in the FCA test case on business interruption insurance justified our position. As this BBC headline on 15 September 2020 shows:
Small firms thrown lifeline in insurance test case ruling
A further decision in that case by the Supreme Court also provided hope for some policyholders, and a recent case in the High Court has now extended that further.
What You Should Be Doing?
1. Check whether you are now covered
The judgments made by the various courts mean that many claims will now be covered that insurers thought (and told policyholder’s) were not. You should now be considering whether you are entitled to claim from your insurer for COVID-19 related business interruption losses.
However, not all business interruption insurance claims will be covered and each policy wording should be considered carefully. The decisions may affect your claim whether or not your policy was analysed by the courts or whether or not your insurer was involved in the test case or the subsequent cases.
Even if you insurer has not contacted you, you should still consider whether you may have a claim on your policy.
We completed a detailed review of the FCA test case High Court judgment, and its findings on the interpretation of key parts of insurance policies here. We also produced an analysis of the appeal to the Supreme Court here. Finally, we prepared an analysis of how a crucially important recent case has extended cover to policyholders who are likely to have considered after the FCA test case that they were not able to bring a claim here.
We are able to provide specialist advice on whether you are covered and how to present claims to your insurer for business interruption. We also have experience of negotiating with insurers in relation to COVID-19 related business interruption claims.
2. What if my broker or insurer previously informed me I was not covered?
Your broker’s or insurer’s advice will likely have been based on the position prior to the judgments being handed down. You should therefore check whether you are now covered.
3. Notify your insurer promptly if you think you have a claim
Insurance policies will have specific time limits for notifying your insurer of a claim. If you think you may have a claim and have not notified your insurer, you should notify your insurer now.
4. How should I be minimising my losses?
It is a requirement of most policies that you should act to mitigate any losses that you may suffer. You should therefore still be implementing steps such as implementing remote working, attempting to carry on fulfilling order from suppliers or carry on providing a service and attempting to reduce any costs to the business.
Some insurers are seeking to minimise their losses by arguing that policyholders have to enforce any contracts to mitigate any losses to the business. This will need to be looked at carefully.
The Financial Conduct Authority will expect insurers to treat customers fairly, and released guidance on its expectations on insurers, which stated:
We would not expect to see [the customer’s] ability to claim impacted by circumstances over which they have little control
5. What should I do if I think my policy should cover my losses but my insurer does not accept by claim?
There are two options open to you if your insurer has declined cover.
- Complain to the Financial Ombudsman Service
- Issue a claim against the insurer
In order to complain to the Financial Ombudsman Service (FOS) you will need to have exhausted the insurer’s own complaints process. FOS may award compensation of up to £355,000 for complaints referred on or after 1 April 2020 about acts or omissions by firms on or after 1 April 2019. FOS make decision based upon what is just and fair taking into consideration all of the relevant information. FOS will have reference to previously decided case law.
Issuing a claim in the court may be a more expensive option, but is not subject to the same limitation in the level of award given. The courts make decisions based upon an analysis of the relevant legislation and previous case law precedent.
We can provide specialist advice on achieving the most cost-effective resolution to your claim.
Our Commercial Disputes team has also released an article setting out answers to 10 key questions following the test case judgment, which can be located here.
6. How long could it take to achieve a resolution?
This will depend on the approach that your insurer takes. However, we are experienced in achieving a resolution as swiftly as possible.
7. If I need any advice, who should I contact?
If you would like to talk through the consequences for your business, please email us and one of our team will get in touch.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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