DTM Legal talk Business Interruption Policies

Thu, October 15th, 2020

Do these policies offer some clarity & a lifeline for businesses?

The coronavirus pandemic has caused substantial loss and distress to businesses throughout the country leaving many under incredible financial strain to stay afloat. This financial pressure was brought about by the national lockdown and the effects of this are still being felt today. Businesses in some areas are now also facing further local lockdowns meaning some could be forced to close again.

Many businesses have business interruption cover as part of their insurance policies, and this protects them from loss of profit and additional expenses that the business may suffer as a result of damage to a property following a fire or flood, for example. Many of these policies also include specific protection for matters other than physical damage. It was hoped by a lot of businesses that these non-damage business interruption clauses would provide them with cover for the losses they have been suffering as a result of coronavirus related closures, however, this has not been the case.

Not only have their businesses been severely crippled by the Covid-19 pandemic itself, they’ve also then been hit by refusals to cover their businesses when they have made claims to their insurance companies.

As a result of this, the Financial Conduct Authority (“FCA”) started a test case in court with a view to bringing clarity and reassurance to policyholders. The FCA involved leading insurers in the test case that provide a large majority of the types of business interruption policies that required clarification. The FCA chose 21 different policy wordings with a view to covering most issues that could be in dispute between the insurers and their policyholders. The FCA sought guidance from the court as to whether these policies would cover businesses impacted because of the coronavirus pandemic.

The recent judgment has brought some much-needed clarity and reassurance to many businesses. The FCA estimated that there were approximately 700 types of policies, across 60 different insurers and 370,000 policyholders that would potentially be impacted by the judgment. Many of the policyholders which could benefit from the ruling are small to medium sized enterprises who are in desperate need of such support following the pandemic’s impact.

Have you checked your insurance wording? You may be able to claim on your policy.

The policy wordings that the court considered were split into three broad categories: Disease wordings, Prevention of access/public authority wordings and Hybrid wordings. The judgment has overall provided encouraging findings for policyholders and should offer some comfort, particularly for those businesses with policies which include the disease wording. The new lock lockdown restrictions may also open the door for further claims on policies containing the hybrid wording. For full details of the judgment and the wording please refer www.dtmlegal.com/news/business-interruption-policies-some-clarity-and-a-lifeline-for-businesses/

A business should give close examination of any business interruption terms their policies and the particular facts relating to its own business to decide whether it can make a claim. Each insurance policy will need to be considered on its own wording and the facts relating to each business.

It is important for a business to consider its insurance policies and whether it may have any relevant business interruption cover. A business should consider its policy wording carefully and should seek advice at the earliest opportunity so that the policy wording and facts of the particular business can be considered alongside the guidance given by the court in its judgment to put the business in the best position to make a successful claim. The importance of being able to make a claim under such a policy has been brought back into focus by the new local lockdown restrictions and some businesses again being forced to close.

It may be that businesses which have suffered and / or are continuing to suffer because of the pandemic may have a lifeline through their insurance policy.

For any advice in relation to claims under your business interruption policies, please contact Richard Harris DTM Legal Richard.harris@dtmlegal.com or call on 0151 230 1215

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