Covid19 has had a huge financial impact on many UK businesses, with some having to cease trading completely. It has also left many business owners with a loss of revenue if they have been unable to continue ‘business as normal’ due to lockdown restrictions.
The government has made help available with initiatives such as the job retention scheme and business support grant funds. However, this may not be enough to keep some businesses viable. Now is the time to look at your insurance policies to see if you are covered by a Business Interruption (BI) clause. Here is an outline of BI insurance and what to do if your insurer rejects your claim.
How to know if you are covered
In assessing whether your business is covered by BI insurance it must be established that the claim falls within the terms and conditions outlined in your policy. Generally, BI insurance covers a business for the loss of income due to an interruption to normal trading as a result of an external factor that cannot be controlled, such as a fire or flood at the premises. Some BI insurance policies do cover loss of income due to other circumstances such as infectious disease or public authority closures/restrictions. If your policy clearly states the latter, you should consider making a claim for losses as a result of Covid19.
If your BI insurance does not clearly state that it covers you for infectious disease or public authority closures, you may find your claim is rejected. It is vital that you carefully scrutinise your insurance policy to check your entitlement as many policies are not always clear.
The Financial Conduct Authority (FCA), the UK’s financial services regulator, has stated that insurers should be fair, clear and avoid misleading their customers when it comes to making a claim. However, many are finding that their insurance companies are not complying with these guidelines.
In some cases it will be clear that the insurance policy does not cover a business for a global pandemic. The FCA agree that in these cases, insurers are entitled to reject Covid-19 claims.
However, in other circumstances, policy wording may not be clear and may not list the scenarios the business is covered for. This may leave some businesses feeling as though the insurance company is deliberately withholding payment and for some this may be a lifeline for their business’ survival. If you find yourself in this situation you should seek legal advice, especially if you are unsure on the terms of your BI policy.
What to do if your claim is rejected
If your claim is rejected by your insurer and you believe the decision is wrong, you should challenge the decision by making a complaint to the Financial Ombudsman Service (FOS). The FOS is available to consumers, charities, trusts, as well as small and medium-sized businesses. The service is free and relatively straightforward. However, if you wish to use this service you must have made a complaint to your insurer before contacting the FOS.
As the FOS is not necessarily bound to follow the law when coming to a decision, it can be beneficial to businesses. Their determination is based on ensuring that they are fair and reasonable in all circumstances. Of course, relevant legislations will be taken into account during the decision as this gives the ombudsman a broader discretion to find a fair decision.
There is a limit on the amount of compensation that can be awarded by the FOS, which is capped at £355,000 for complaints made on or after 1st April 2020. The FOS can recommend that further compensation is to be paid by insurers, but they do not have the power to enforce this. If you believe you are entitled to compensation exceeding this amount you should speak to a legal professional who can advise the best course of action.
Coordinated legal action
Another option, which has been seen and documented by the media recently, is a coordinated legal action against an insurance company. This is where customers who have all had the same difficulties in receiving the BI compensation come together to take legal action against the insurer. For this to be successful, there needs to be a number of businesses who have the same complaints against the insurer and the action must be well-publicised. For example, the Hiscox Action Group, made up of over 100 nightclubs, pubs and bars, is planning coordinated legal action against Hiscox Insurance due to its non-payments of BI insurance claims during the pandemic.
Expert legal advice
The situation surrounding BI claims is continually evolving, with the FCA seeking court declaration to resolve claims made by customers and publishing a list of policy terms to present to the court as part of their case to bring further clarity when interpreting policies.
If you are unsure of your position or believe your claim has been wrongfully rejected, you should seek the advice of a qualified professional with experience advising on insurance litigation and disputes. They will be able to assess your policies and unique circumstances to ensure you are able to reach the best possible outcome.