The Coronavirus pandemic has affected all of us, and for many businesses, has led to financial loss. This has caused a grey area for businesses making a claim for the financial interruption to their business as a result of the Covid-19 pandemic and the lockdown.
A small percentage of businesses have insurance policies which are unclear about what constitutes an interruption to business (with regards to the Coronavirus pandemic). This has led to confusion as to whether they are able to make a claim or not.
The FCA brought a test case to the High Court which then went to the Supreme Court to provide clarity to the extent that insurers with ambiguity in their policy wordings were obliged to indemnify relevant business interruption policyholders for financial losses caused by the pandemic.
This clarity was urgently needed by those policyholders who made a claim for coronavirus-related interruptions to business. The appeal from the FCA has been substantially allowed which will in turn allow these businesses to have their business interruption losses paid.
Most SME's have Business Interruption policies in place, but many of these policies only offer basic cover in the event of property damage.
Some policies also offer BI from other causes, notably infectious or notifiable diseases ('disease clauses') and prevention of access and public authority closures or restrictions ('prevention of access clauses').
There have been many cases of insurers disputing liability while some others have accepted liability under their policies. This has highlighted the lack of clarity as to what exactly is covered by BI policies in relation to Covid-19.
Most businesses do not have specific pandemic cover in place as it was cost prohibitive before the pandemic and often wasn’t even available.
In some cases, unaccepted claims will now be reviewed to see if they fit into the Supreme Court ruling as acceptable claims. If you are unsure, carefully read through your insurance policy and if in doubt, contact your insurance broker or insurer directly.
It is important to remember that with most policies, there will be an obligation to give prompt notice of any reason you may wish to make a claim. Failure to do so may result in your claim being denied. If you think you may be entitled to claim, we recommend you get in touch with your insurer via your broker as soon as possible to discuss this.
This ruling will allow some businesses to be able to make a claim on their Insurance for Business Interruption. We are working with a local dispute lawyer Michael Blandy to try to resolve insurance disputes for our clients and business contacts where a claim should be settled.
The FCA and Defendant Insurers are currently working with the Supreme Court to form a set of declarations based on their ruling. A set of Q&A's will then be published by the FCA for policyholders based on the test case.
The FCA gather data from insurers and publish a list of BI policy types that potentially respond to the pandemic. Guidance has been drafted by the FCA for policyholders on how to prove the presence of coronavirus as this is a condition in some policies.
The consultation period closed on 18 January, but the closing date was extended by the FCA to the 22nd January for any supplemental comments arising from the judgment. Finalised guidance will be issued by the FCA as soon as possible.
A review of your insurance policy will ensure that you have adequate cover in the event of a claim, and you may even be able to save money…
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GBS Insurance Services is a premier commercial broker based in the South East of England. We have a varied client base including manufacturing, online retailers, tea houses, charities and landlords....