Will Your Business Qualify for Covid-19 Business Interruption Insurance?

Mark Aspin Director and Head of Dispute Resolution provides an update.

Since last May, we’ve been following the proceedings launched by the Financial Conduct Authority (FCA) to add some clarity to the availability of “Business Interruption” (BI) insurance as a result of business closures as a result of the pandemic.  Last September the High Court came to its conclusions, and as the national press has now reported the Supreme Court has issued a final judgment.

The news says that the case was “substantially successful” for policyholders. But what does that actually mean?

Practically, it actually doesn’t change our advice since this issue first arose. Each policy and claim does depend on its own particular wording and own specific facts. The test case does not (and was never intended to) answer every single dispute.

However, some questions as to what particular wordings mean have now been answered; and arguments that insurance companies were raising as general points of principle have been dismissed.  Key decisions in the favour of policyholders included:

1. Cover for a “disease” as part of BI policy include where such disease is part of an epidemic – it would not only cover isolated outbreaks.
2. If a business closes as a result of government instruction without it having legal force, this is still effective for any “prevention of access” term of BI cover.
3. Causation has to be proved for any contractual claim – here the test is to ask if the “loss from interruption  … was proximately caused by one of more occurrences of illness resulting from COVID-19 … [as] as result of Government action taken in response to cases of disease which included at least one case of COVID-19 within the geographical area covered by the clause.”
4. It is wrong to say that a claim should be limited to anticipated turnover reflecting a downturn as a result of COVID-19 which may have happened even if the business was not closed.

The FCA have stated that they are going to work with insurers to conclude claims processes as quickly as possible. If you have submitted a claim, hopefully your insurers will now deal with the claim promptly. There is considerable pressure on insurers to move forward on matters.

If your claim is rejected (in part or as a whole), then it will remain important to consider the policy against the detailed judgment to establish if the rejection is in line with that judgment or not. The FCA have indicated they will publish a set of Q&As and draft guidance for “proving the presence of coronavirus” (as is required in some policies) which will assist with this.

We have also found that some insurance companies are seeking to rely on alternative grounds to decline indemnity separate from the wording of the BI clauses, which will always be fact dependent.

If you believe your claim is being wrongfully rejected, then you will have the options of pursuing a complaint through the Financial Ombudsman or even, if necessary, the court. Consider taking professional advice to ensure any claim is properly considered and you obtain all indemnified losses you should be entitled to. At Cartmell Shepherd we remain able to assist with your claim.

If you would like to chat to Mark about any of the information in this update please call 01228 585716