Uncertain if you can make an insurance claim arising from the disruption of your business as a result of the present Covid-19 lockdown?
WE MIGHT BE ABLE TO HELP YOU.
- We are living through difficult times, without precedent, and whilst the Government has opened its coffers to save businesses during the coronavirus crisis, this is not the case with the insurance industry.
- The way in which insurance is sold is of critical importance, as the Banks have found to their cost when selling PPI. In competitive markets, insurers sometimes exaggerate the extent of cover available and can be held liable if they misrepresent any aspect of the cover sold.
- Business interruption cover is normally linked directly to standard property insurance and was originally introduced to cover damage caused to business activities resulting from direct damage to property caused by an insurable risk, such as fire or flooding.
- As business interruption became a standard addition to property insurance, so insurers began to enhance the offering by including variations known as “extended incidents”. For example, damage arising from notifiable diseases or from an “event” occurring within a specified distance from the property, preventing access to property either directly or by the action of a Public Authority to the detriment of the business being carried out there.
- The problem now is that with the evolution of business interruption insurance, the wording of policies can conflict with the cover which insurers intend to provide. The intention of insurers is irrelevant if it is not reflected in the policy wording. This problem is exacerbated by the absence of uniform wording so that few policies use the same wording.
- On the face of it, this is a recipe for an avalanche of legal claims to establish the exact nature of the cover. The Financial Conduct Authority has recently announced that it intends to test different policy wording through the courts, which will be very helpful, but could take some time. The problem is that the cost of litigation and the risks associated with it are prohibitive, which is why there is likely to be a number of class actions, such as that currently threatened against Hiscox. Unfortunately this may well take some time to play out.
- It is clear that the insurance industry was not prepared for a global pandemic such as Covid-19. Having said that, Marsh, one of the largest firms of insurance brokers in the world, did introduce a policy to cover pandemics - it was not taken up by a single business!
- What is now being claimed is that the insurance industry would not be able to meet the cost of damage resulting from business closures demanded by governments following the outbreak of Covid-19, although the majority of claims would be capped under most policies.
- It is for this reason that the knee-jerk reaction of most brokers and insurance companies currently is to reject any claims from clients, regardless of the policy wording.
- In the US, such rejections have already resulted in law-suits and the introduction of legislation to facilitate claims by smaller businesses regardless of the policy wording.
- Whilst the focus has been very much on cover in respect of notifiable diseases and whether Covid-19 falls within the definition of a “notifiable disease, a large number of claims are likely to fall under sections which relate to “prevention of access”.
If you have business interruption cover let us help you with an initial review of your policy documents at no cost - click below to contact us. Also see our general coronavirus support page.
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