Business Interruption Insurance Claims

Many businesses in particular small businesses do not get Business Interruption Insurance as they wrongly  assume that losses can be effectively covered by other insurances such as buildings and contents policies. Whilst these policies can assist in correcting any damage brought on by, for instance, a fire or a flood, they do not handle consequential losses that flow from such events as the current pandemic.

Over the last year many businesses have had to close their doors on command of the government and although furlough has been in place the loss of actual sales and left many businesses incurring substantial losses. Many are finding that these losses are not covered by their current policies.

If you or your organization has had the insight to take out Business Interruption insurance, you may still find some trouble in effectively making a claim.

Will my claim be covered?

It will be crucial for anybody claiming from a business interruption policy that they can show what the reason for their loss was. This perhaps sounds simpler than it is.

It will be important to inspect the wording of the policy to ensure that it covers ‘losses brought on by government (or other public authority) restrictions arising from an incident of a notifiable human illness’. Many policies will have wording that is similar or to that result.

If your company is non-retail, insurance companies might decline to pay out on this basis. Companies must inspect the duration for which their insurance claim relates as this may also affect the ability to claim.

Services that have actually suffered losses due to the fact that their properties have been infected should likewise beware about declaring this as the reason for their losses. Insurance providers are most likely to argue that the business would have likely suffered a financial loss regardless due to the pandemics impact.

How will mitigation of loss effect my claim?

Mitigation is most likely to be a point of contention in many business interruption claims. Businesses will constantly have a task to do what they can to minimise their losses, whether or not their service interruption policy specifically says they should.

It is worth noting that a lot of policies do discuss mitigation as a term of the policy. An organisation is likely to lose its right to claim altogether if it fails to take ‘reasonable’ or ‘all practicable’ steps (depending on the phrasing in the policy) to minimise its losses.

For those businesses that could remain open, insurance providers may, in many cases, claim that a failure to adjust resulted in greater losses. Maybe the biggest point of contention however will be surrounding the Coronavirus Job Retention Scheme (aka the furlough scheme). Insurance companies might be able to argue that a business claiming under its interruption policy did not approach the pandemic in a productive way either by failing to use reserves or by using too much before claiming hence preventing their ability to recover from the impact of any loss.

What other circumstances could effect my policy?

It is usual for Business Interruption policies to consist of a provision that allows insurance companies to lower the amount paid if there is a market trend that would have impacted business irrespective of the occurrence of the insured event i.e. COVID-19.

Whilst the majority of companies will be able to point to COVID-19 as the result of any recession in their sector, it is worth noting that changes in the financial market, weather and other factors such as a price drop in oil, gold etc may be reasons for a drop in income which your insurer may attribute to a proportion of your losses.

Just how much could I be granted?

If you pursue a claim and your insurer accepts that you are due a pay out there still may be disparity with how much you have lost and how much your insurer is willing to pay out. The policy itself will usually go into some information as to how awards are calculated. Common pitfalls here are:

– A failure to offer sufficient evidence of the losses suffered (typically an outcome of bad record-keeping).

A limitation on the indemnity duration (most policies will just indemnify businesses for as much as 24 months after the occasion whereas the impact of COVID-19 will certainly be felt for a lot longer), and your policy is likely to have a liability limitation, i.e. a limitation on the amount that the insurer will pay.

Given the above it is clear that even if you possess Business Interruption Insurance making a claim may be difficult. If your claim has been unsuccessful  and you disagree with the outcome contact Versus Law today.

We operate on a no win/no fee basis so you have nothing to lose.  If we are successful, we will deduct an agreed percentage (up to but no more than 25%) from any damages recovered.

Fill out our business interruption contact form to see if you’re eligible to make a claim for compensation.

Got more questions? Check out our FAQ’s in the link or call us on 0161 249 5087.