Business Interruption Insurance Disputes

If like many businesses you have been financially affected by Covid-19 pandemic, it is reasonable to assume that you have checked your insurance policies to see if Business Interruption Insurance cover might respond.

The introduction of the lockdown on 23 March 2020 and the measures imposed by the Government, such as limiting customers and restricting how a business can operate, meant that businesses have had to adapt to survive.

However, with the forced closures some businesses have not been able to operate at all. Many have sought to rely upon their Business Interruption Insurance, only to discover whilst trying to make a claim, their insurer has declined it stating the policy does not cover Covid-19.

Sintons have been advising businesses who have faced similar issues on their insurance policies.  We can assist your business if you are in doubt about your policy wording.

In response to the number of potential claims, the Financial Conduct Authority (FCA) has commenced test case proceedings in the High Court to seek clarity on the interpretation of various forms of business interruption policy wording. An eight-day hearing will commence on 20 July 2020 with the insurers’ Defences and Reply to be filed beforehand. The FCA mandates that all financial services and products must treat their customers fairly and due to the ambiguity and interpretation being adopting in the wording of some policies, this action serves to make sure this happens.

It is not yet known how far any Judgment against the insurers might be applied to alternative policies due to the specific wordings that have been chosen to be part of the test case. However, the FCA have made it clear that not all policies will be affected by the outcome of the test case; particularly those that only have basic cover for business interruption as a consequence of property damage.

Instead, the key areas that will feature are clauses concerning notifiable diseases and the proximity to a premises, denial and prevention of access in addition to government restrictions. There are also important questions to be asked about causation and what must be the cause of the loss (if there is one) to the business to allow a policy to respond. Furthermore, any Judgment could be appealed with some anticipating this will be heard in the Supreme Court for the final determination.

These remain difficult times and the effects of Covid-19 can still be seen with businesses hoping the outcome of the test case will be favourable in respect of their policies. As that outcome is potentially months away, many businesses simply cannot afford to wait. Businesses should be engaging with their insurer now to assess where they stand and ensure that they do not fall foul of any policy notification requirements.

If your business has been affected by Covid-19 and you would like further information about Business Interruption Insurance or if find yourself in a potential dispute, please contact Adam Hutton or a member of the Dispute Resolution Team to see how we can help.

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