As has been well reported over the last month or so, the insurance industry is under fire for failing to pay business interruption claims, as noted by Jonathan Compton, partner at law firm DMH Stallard.
Although Wimbledon has been successful with its event cancellation claim, restaurant owner and celeb chef Raymond Blanc was one of the more high profile business owners featured in mainstream media over the weekend – many of whom feel aggreived at the insurance companies right now. Donald Macleod, a bar owner and journalist in Scotland, has also been highly vocal after being refused a claim on his interruption policy.
As an industry we have to deal with this issue head-on. The terms and conditions are crucial with any contract of course, but for those who thought they HAD contagious disease cover listed in the `What is Covered’ section of the policy Schedule, but are now finding it hard to claim, the anger is understandable. Here’s some analysis and comment from Jonathan Compton:
“We are being approached by an increasing number of SMEs for advice in how to deal with insurers who are not paying out on business interruption claims. These inquiries stem from the plain fact that with the Covid-19 crisis, the level of business interruption claims have risen.
“Hiscox, noted for its high end high risk market, is now looking down the barrel of a class or group action. They released a statement last week (15th April) to justify its position, saying its business interruption exposure was limited due to the Covid-19 emergency.”
The statement from Hiscox was in response to a threat of legal action from the Hiscox Action Group (HAG).
What is a business interruption claim? “Business interruption” or “BI” insurance is designed to insure the purchaser for income lost during the period of interruption or the period necessary to repair physical damage to insured property.
“The recent threats from HAG and indeed others, will do nothing to improve the reputation of insurers. All too often, the insured, having paid no shortage in premiums, will experience a reluctance on the part of insurers to pay out when their assistance is most needed.
“Standard tactics include (i) exceptions and limitations (ii) general attrition, the purpose of which is to wear down the claimant, along with the ‘yes, you have a valid claim, now let us look at what you can prove in terms of losses….’ routine.”
The Executive Director of the British Insurance Brokers’ Association (Biba), Graeme Trudgill, commented recently: “The industry is getting hammered by MPs and the press over business interruption.”
“The question that insurers must ask themselves is why they are coming in for such a hammering and whether the hammering is deserved. Clearly they are being criticised because they are not paying out on claims brought by the small business sector.
“Sadly, all insurers have to do, in most instances, is to wait. Many of the businesses in trouble will be wound up. At this point, the claim against the insurer is in the hands of a liquidator – usually – who will have limited funds to pursue the claim. Even if the SME survives, it is unlikely to have the funds to pursue a large and deep pocketed insurer through the courts. But there are remedies that can be pursued against ‘reluctant’ insurers.”