Has your insurer refused a claim on your business interruption insurance?

The recent judgment of the Supreme Court (https://www.supremecourt.uk/cases/docs/uksc-2020-0177-judgment.pdf) has found that many small to medium enterprises (SMEs) with business interruption insurance will be covered for losses they have suffered as a result of the covid-19 restrictions.

This provides a welcome and timely relief for many SMEs who have suffered greatly as a result of the ongoing pandemic. Many of our clients have asked us to advise them on what this judgment will mean for them and their business. Whilst this is dependent on the wording of each specific insurance policy, we can provide the following general guidance which you will find useful. Note that we will need to carefully assess your policy wording to advise whether your claim is likely to be successful. 

Call 01229 580956 or email info@progressionsolicitors.com for advice on whether you can still make a claim, even if refused by your insurerTypes of Business Interruption Insurance

There are two main types of business interruption insurance which may provide some cover:

Disease Claims

This will generally provide insurance cover where a business has suffered loss as a result of any person with Covid-19 attending a business premises or being within a specified distance of that premises.

Insurance companies tried to argue that cover should only be provided for losses suffered as a direct result of a Covid-19 positive test within the specified distance of that premises. This would mean that where a business was forced to close for example,because members of staff had to self-isolate as a result of coming into contact with someone with Covid-19 on site, then cover may be offered. But, where a business closed as a result of a national or regional restrictions which could not be directly attributed to Covid-19 near the business premises, then cover would not be offered. Clearly this severely limits which businesses could claim and what would be recoverable.

Fortunately, the Supreme Court have taken a more sensible approach and decided that businesses should be offered cover where they have closed as a result of national or regional restrictions. This is provided that a business can point to a case of covid-19 in their specified area. Given the spread of Covid-19 around the country, this should not be difficult for most businesses to prove.

Prevention of access

Policies will sometimes provide cover where the Government or a Local Authority places a restriction on a business by preventing access to, or use of, the business premises.

Whether a specific instruction by the Government or Local Authority constitutes a ‘restriction’ will depend on each circumstance. The Supreme Court did however make it clear that the Prime Minister’s statement on 20 March 2020 ordering certain businesses to close would be considered a restriction imposed by the Government. The result of this was that losses resulting from the restriction should be recoverable. This should suggests that insurers should be taking a broad approach as to when cover will be provided.

What if my business would have lost money anyway even if I didn’t have to close?

Importantly, the Supreme Court ruled that a claim should not be reduced because the losses suffered would have occurred anyway as a result of the pandemic. For example, if a pub has been ordered to close, their claim for loss of profits should not necessarily be reduced because trade would have suffered even if the pub was not legally required to shut. Less people would have visited the pub during the pandemic resulting in losses, but the Supreme Court rule that this is not necessarily a reason for insurers to reduce a claim.

The Supreme Court also found that a business may be covered for a partial loss of access. For example, where a business is unable to use part of its premises or is unable to carry out part of its business activities. If a pub or restaurant stayed open for take-away business only, as a result of the ruling, they may be able to claim for the loss of the in-person aspect of their businesses. Cover would only be provided for the part of the business or premises which a business has not been able to use.

What Next?

If you have already made a claim for business interruption then your insurer should be in contact shortly to advise whether or not you are likely to be covered in light of this judgment and how much money you will be able to recover. Insurance companies have indicated that valid claims will now be settled as soon as possible.

If you have not already made a claim then you should review your insurance policy and contact your insurance broker as soon as possible to see whether you may be covered. It is a condition of some insurance policies require that you notify the insurance company within a set timescale so you should do this without delay to ensure that you do not miss out.

It is likely that your insurance company will ask you to provide evidence of your lost profits. You may need to speak to your accountant and obtain your accounting records showing previous years’ profits. The exact information your insurance company will require will depend on your insurance policy.

My Insurance Company has rejected my claim. What can I do?

We can review your policy and advise whether we believe you still have a claim. If you would like us to assist, please call us on 01229 580956 or email info@progressionsolicitors.com