Business Interruption Insurance
For the vast majority of businesses who have been forced to close during lockdown and are now emerging blinking into the light, you will be avidly reviewing your insurance policies to assess the prospect of recovering lost profits through business interruption insurance.
While The Association of British Insurers (ABI) and certain insurance companies have already begun to disseminate information suggesting those claims will not be successful, there are certain policies where it is possible. Indeed the Financial Conduct Authority (FCA), which regulates the insurance industry, has unequivocally confirmed that there are a number of policies where it is clear that Covid-19 related losses are covered.
This is because the Department of Health and Social Care added Covid-19 to the list of notifiable diseases on 5 March 2020, declaring that it hoped it would assist people in recovery of their losses from insurance companies. Unfortunately, this declaration has proven somewhat optimistic to date, but nonetheless the FCA declaration illustrates there is scope to succeed for those who are diligent and/or seek professional assistance.
As ever it all depends on the detail, so check the policy wording carefully before you proceed. These are often substantial documents, requiring you to review not only the summary schedule, but also the full document, cross-referencing between sections. Moreover, there are many traps for the unwary, not least in relation to notice provisions within your policy, which may be time limited; therefore I strongly recommend that you verify that aspect immediately, to minimise the scope for loss of opportunity altogether.
Then there are more detailed questions: whether the right to recovery is linked to property damage or the damages claimed can be characterised more broadly; if the right to recovery is linked to notifiable diseases, is there an exhaustive list? Moreover difficult questions of fact as to whether anyone within the vicinity of the business has actually suffered from Covid-19 can be determinative while restrictions/exclusions on recoverable sums are common.
The FCA declared on 1 May that it would be entering the legal arena with a view to determining some commonly occurring questions that are likely to be disputed between the insured and insurer, but no further detail is available yet. Nonetheless, if your insurance company or broker refuses your business interruption insurance request illegitimately, then there are also remedies available either within the courts, or through the Financial Ombudsman Service (FOS).
The Courts are required to consider the literal meaning of the policy wording to assess the right to recovery, however, the FOS operates on an arguably broader question of what is fair and reasonable. Indeed the FOS initially published its view by stating that it expected insurers to move beyond the strict interpretation of policy wording, however has since withdrawn the publication.
I hope this has given those of you faced with this difficulty an indication of points to consider. Naturally this blog is a summary of complex questions of law and fact, so should not be relied upon alone. If you are having difficulty with business interruption insurance or seeking advice on this topic, then please contact Mark Wrinch by email on firstname.lastname@example.org or 01473 350581, who will be happy to assist.
Mark Wrinch is a solicitor specialising in dispute resolution in the Business Services Team at Barker Gotelee Solicitors.