Business interruption claims and COVID-19: Has your claim been settled?
January’s Supreme Court judgment in the FCA’s test case against insurers for COVID-19 business interruption insurance claims was a great relief to many SMEs, as we wrote at the time (see below)
Reports at the time of the judgment said that 370,000 businesses could be impacted by the test case – not all favourably although the judgment was undoubtedly good news for businesses overall.
What has happened since then?
The FCA has been collating and publishing claims data, obtained directly from insurers, from time to time, most recently to 5th May 2021. At the time of writing this article the data had been published as at 6th April 2021. At that date just over 35,000 claims had been accepted as valid by insurers who responded. This is less than 10% of the estimated number of businesses that were potentially affected so many claims have been refused – for now – or remain pending.
Over 10,000 claims had been settled and fully paid, as at 6th April 2021, so many accepted claims have not yet been resolved. In only just over 10% of the other cases, where claims had been accepted as valid, had an interim payment been made.
Interim and final payments made, according to the data, totalled just under £600 million, roughly £44,000 on average.
Many business interruption policies only allow for claims as a consequence of property damage, so a claim under such a policy based on closure of a business due to COVID-19 would not be covered. However there remain many grey areas.
The FCA also wrote to all CEOs of insurance companies which offer business interruption insurance. They have offered guidance as to how insurers should deal with claims, given the delays that had occurred while the judgment was awaited. It is hoped that insurers are heeding these messages.
If you are a business which has notified a claim and this has either been rejected or is still pending:
- Are you affected by the test case? If you are unsure the FCA website may tell you. They also publish a list of policies that potentially provide cover for interruption due to COVID-19 – https://www.fca.org.uk/firms/business-interruption-insurance/policy-checker
- What have your insurers told you about the test case and its impact on your claim?
- Keep consulting the FCA website and sign up to receive regular updates.
- There are action groups for businesses wishing to make claims against certain insurers.
- Have you exercised your right to complain to the Financial Ombudsman Service (FOS)? Bear in mind that there are deadlines for doing so, which may be tight.
- Take legal advice if you receive a response that you are not happy with, or if you have any legal queries.
- Advice from your accountant may also be worth taking if the amount of your claim is being challenged.
If you are a business which may have business interruption cover but have not yet claimed:
- Check the terms of your policy and check the FCA website to see if your policy is listed as potentially providing cover.
- If there appears to be a basis for making a claim, lodge it as soon as possible.
- If the claim is rejected, consider whether you can go straight to the FOS or whether you need to make a further complaint to the insurer.
- Again, take legal advice at an appropriate time.
If you a have a business interruption claim and your insurer continues to dispute liability or loss we will be pleased to discuss it with you:
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