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Business Interruption Insurance Solicitors
Business interruption insurance covers companies for loss of revenue during periods when the business cannot trade as usual due to an unexpected event. While this type of insurance is useful for reducing commercial risk, it is not always clear when and how you can claim.
The commercial litigation team at JMW can review your policy, advise if you have a claim and challenge any insurers who are refusing to cover your business. We will work with you to ensure your claim has the best possible chance of success by putting a full legal argument together with the necessary evidence to support your claim and liaise with insurers to reach a settlement.
Making a Claim for Coronavirus Business Interruption
Most businesses in the UK will have likely been interrupted by the coronavirus outbreak in March 2020 and subsequently. It is estimated that there are 700 types of policies across 60 different insurers affecting 370,000 policyholders. Many experts and solicitors have been looking to see if insurance policies should pay out, and it has become clear that there is a myriad of policies and wording.
The insurance industry’s mantra has always been that these policies were not designed to cater for a worldwide pandemic and the level of premiums did not have this in mind. However, many policies have wording that might be said to cover coronavirus.
To try and clear up the uncertainty, the Financial Conduct Authority (FCA) brought a test case in the High Court for the benefit of all policyholders against eight insurance companies where it tested the wording of 21 sample policies. It was hoped that this would cover off the majority of wordings used by insurers in their policies.
The examined wordings were broadly split into three categories of coverage; business interruption due to (i) an outbreak of disease, (ii) prevention of access to the insured premises or (iii) a combination of the two.
Judgment was delivered on 15th September 2020, spanning 163 pages of considerations in relation to whether the occurrence of COVID-19, the government’s institution of lockdown measures or both would be considered to trigger the policy coverage for the insured.
The High Court found that many of the standard policies would be triggered by the event of the COVID-19 pandemic, giving hope that policies will payout.
Eight parties, including the FCA, Arch Insurance, Argenta Syndicate Management, MS Amlin Underwriting, Hiscox, QBE, Royal & Sun Alliance and Hiscox Action Group, have been granted ‘leapfrog’ certificates for an appeal to the Supreme Court. Deadline for appeals was 28th September 2020 and the Supreme Court will hear legal arguments over four days from 16th November 2020. Judgment is expected late 2020/early 2021.
Questions Relating to Coronavirus Business Interruptions
Can creditors make a claim under business interruption insurance related to coronavirus?
Creditors of distressed businesses will stand to benefit from the High Court’s decision if the company is a holder of a valid business interruption policy.
The decision means that administrators/liquidators of insolvent businesses should check the insurance policies held by the business to see if a claim can be made against the insurer in relation to business interruption. If such a claim is successful, it means that creditors of businesses holding these policies should see an improvement in their dividends.
Secured creditors of distressed businesses should make contact with the insolvency practitioner to enquire whether the business benefitted from such a policy. If so, the lender should review its security to confirm if the policy forms part of the security portfolio.
Can I make a claim on my business interruption insurance even though my company was not asked to close by the government?
If you decided to close your business regardless of being asked by the government, you may still be able to make a claim. Many businesses opted to close in response to customer and clients’ fear of the pandemic, which would be deemed as reasonable. Furthermore, some types of businesses would have struggled to implement and follow social distancing measures and the two-metre rule and, as a result, closed their business to protect staff and customers - this may also raise a valid claim.
Can I make a claim without a copy of my insurance policy?
You will need to contact your insurance company and request copies of your policy (i.e. documents, schedule, certificate and booklet). Insurers are legally obliged to provide these.
How JMW Can Help You Make a Claim
JMW is inviting policyholders who think they might have a claim to register their details with us. This will involve answering a few questions and supplying key insurance documents. Other actions we are recommending that policyholders take include:
- Liaising with your broker, if you have one
- Knowing what payment you might be entitled to and how it will be calculated
- Getting a sense of what your claim will look like
- Understanding which documents and proof you will require
- Ensuring you collate and keep any evidence
Our team will be able to sense check the policy against the present High Court judgment and, once the Supreme Court’s decision has been made, we will then assess your claim.
We will work on a transparent fee model, which will be agreed in advance and will be formalised prior to any work being undertaken.
Your solicitor will provide regular updates so you know what is happening throughout the process, and explain your options in clear, plain English.
The corporate recovery team includes specialist lawyers who can assist insolvency practitioners and secured lenders in evaluating any potential claims.
Examples of Business Interruption
Business interruption insurance is relevant for a range of companies, ranging from small to multinational organisations. It usually covers physical damage, such as fires, flooding and natural disasters, that stops a business from trading, but some interruption policies can be upgraded to include cover for certain diseases and denial of access.
Examples of scenarios that can impact a business’s ability to trade include:
- A fire or flood damaging key office space
- Damage to stock or equipment
- A key supplier being unable to reach you
- Clients/customers not being able to get into your business premises
- Infectious or contagious diseases
- A decision of government or a statutory body to close your business
If any of these incidents happen, your business may incur unexpected costs and losses, preventing you from generating revenue.
What is business interruption insurance?
All companies will hold general business insurance to protect themselves against a number of perils and risks. Part of the insurance policy is designed to compensate a business if it is ‘interrupted’ for whatever reason. Often, this happens when premises are physically damaged due to a fire or storm. However, many policies respond to situations not just where the physical damage has occurred.
What does business interruption insurance cover?
Cover may be provided for the following:
- Profits - based on the prior months’ performance of the business
- Fixed costs - e.g. operating expenses and other incurred costs of running a business
- Temporary relocation - the cost of moving to and operating from temporary premises
- Wages - allowing employers to pay workers when they cannot operate
- HMRC taxes - to ensure a business can pay taxes on time and avoid penalties
- Loan repayments - cover for monthly loan repayments when a business isn’t generating income
- Other expenses - reimbursement for reasonable expenses that allow a business to continue to operate