We have all been enduring – and we continue to try to get through – a couple of years that will live long in the memory for so many negative reasons.
And the economic impact of the coronavirus meant UK businesses were turning to their insurers for help, lodging claims under their business interruption insurance policies.
These businesses certainly had cover in place to protect them in the event of loss of income due to means beyond their control, the most glaring and widespread in living memory being the coronavirus pandemic, of course.
In the normal course of events, business interruption insurance payouts would be issued in circumstances such as a global disease – but many insurers refused.
Each business interruption insurance policy will be different and exactly what is covered will depend on its precise wording. But, ultimately, business interruption insurance exists to protect policyholders where a particular prescribed event causes loss, or an inability to trade. The most common of these are traditionally fire and flood.
Other causes for a claim at a business premises could include burst pipes, impact or weather damage, theft and vandalism.
The COVID outbreak resulted in unprecedented challenges for the economy, and many of those businesses – unable to trade because of the government’s restrictions – turned to their insurers, only to find their claims arising from the pandemic refused.
In response to huge numbers of claims being rejected, the Financial Conduct Authority (FCA) began proceedings on behalf of policyholders and took legal action against eight insurers over their interpretation of business insurance policies. Although the High Court initially gave its decision, in which it backed the insurance companies, that was not the end of the story. With so much economical and legal significance attached to the case, the FCA appealed to the Supreme Court.
And, four months on, the Supreme Court judgement found in favour of the policyholders. It was a decision that provided business owners with answers and has since led to business interruption claims being paid to small and medium-sized enterprises (SMEs) in full or interim payments reaching the billion-pound mark. This helped many to survive and continue trading beyond the pandemic.
COVID-19 has disrupted millions of businesses around the UK, particularly for SMEs who have been beset by an average of £130,000 in late payments. However, the Supreme Court ruling in January provided business owners with much-needed answers, as well as a lifeline in their struggle to get through the series of imposed lockdowns.
Thousands of business interruption claims, previously rejected, are now being paid. If your firm has suffered due to your insurers refusing you the financial assistance you are entitled to, speak to our legal team.
Barings Law’s team of experts can take on your case on a no-win no-fee basis and help you to claim some of the money you have lost. This could include compensation for your loss of revenue, business costs such as rent and wages as well as charges from loans acquired due to COVID-19. Our solicitors have the expertise required to work through insurance policies, as well as handling the legal side of your claim. We make sure that everything is dealt with professionally to help you get what you are owed.
If you had your trading disrupted and your insurers refused you the financial assistance you were due, click below to find out how we can help you claim the compensation to which you’re entitled.
Your initial consultation is free and without obligation, and a member of our team can talk you through the process.
Get started by contacting us here.
Still have questions? No problem, here’s a guide to what you need to know about your SME’s business interruption insurance:
What will my claim be based on?
Barings Law will focus on establishing your insurers’ liability, and what effect the delay in paying had on your business and its building(s), stock, machinery and ability to trade.
What is business interruption insurance?
Business Interruption Insurance (often known simply as BI) is designed to protect businesses against financial losses.
A business’ buildings insurance covers physical damage while BI covers the income that businesses would have received had the incident – for instance fire or flood – not happened. Having business interruption insurance could make all the difference between your company surviving or closing down permanently.
Who needs business interruption insurance?
This comes down to a number of factors but the prime thing to consider is the effect that substantial damage to a firm’s building or its assets has on its ability to trade for a sustained period of time.
For example, a business with substantial assets such as stock or equipment would be left exposed to huge problems if they were damaged or destroyed. A self-employed trader whose work only relies upon a laptop and internet access would find it easier to access replacement or temporary premises and equipment and is less at risk.
Is business interruption insurance a legal requirement?
No. It is the business owner’s responsibility to assess what risk to the business there is and what effect a significant event, such as flooded premises, would have on their ability to continue functioning. If your business would be unable to continue in such circumstances it is highly likely that you’d need business interruption insurance in addition to your building insurance.
What events does business interruption insurance cover?
The two most common reasons for business interruption claims are fires and floods. The list is not exhaustive, however, with burst water pipes, impact and storm damage or losses due to theft and vandalism also viable reasons for making a claim. Business interruption insurance exists to protect its business from any incident that affects its ability to trade.
How do I know if my business is covered?
Business owners often make the mistake of assuming that buildings and contents insurances will cover loss of income following a disaster at their business. The fact is that these insurances – usually bought as standalone policies – make no allowance for the financial losses sustained due to an inability to trade. Business interruption insurance is typically sold as an add-on, and so business owners should confirm the level of cover they are buying at the outset of their policy.
What does my indemnity period mean?
This is the maximum period during which a business’ earnings are covered. These are usually one, two or three-year periods and start from the date of the incident that prompts the claim. When buying BI, it is important to consider how long your business is likely to need before it can once again trade independently. You will need to consider the rebuilding of damaged premises and the replacement of stock and equipment.
What is a material damage proviso?
This is a condition of your BI policy that exists to minimise the period during which the affected business will be interrupted. All business interruption policies have a material damage proviso. Its purpose is to ensure that the time taken to repair or replace a business’ assets is minimised, which in turn limits the time taken for the business to resume trading as normal. The proviso is also intended to ensure that funding is available for the repair or replacement of damaged assets.
The key issues of your business interruption insurance policy:
There are two main aspects on which your insurers’ liability rests, and therefore how best to approach a claim for compensation.
Coverage – whether the wording of your BI policy says it provides coverage for COVID-19. Consider how diseases are defined within the policy wording and the proximity of an instance of outbreak to the business.
Causation – the link between the losses suffered by the business and COVID-19.
If this does not provide the clarity you are looking for on the subject of claims on your rejected business interruption insurance claim, contact Barings Law on 0161 200 9960.
My business closed though we were not asked to by the government. Can I still make a claim?
Yes, if you decided to close your business to customers due to COVID, that would be seen as a reasonable reason for making a BI claim. This is especially so if you closed your business in order to protect yourself, your staff and your customers.
Furthermore, you may have found it difficult to stay open and implement social distancing measures – many businesses did. So, if you closed your business to protect your staff and customers, then you may have a valid case to make a claim.
Can I claim on my business insurance if I received a government coronavirus grant?
Yes, as the government grants were paid to offer immediate help for businesses, and the government was acutely aware that business owners were also going to make BI claims.
What can I claim for on my business interruption insurance?
Your BI policy should provide cover for:
- Actual and/or forecast loss of revenue
- Your business costs including rent and staff wages
- Charges from loans acquired due to COVID
I don’t have time to go through all the paperwork. Can I get help with this?
Our legal experts can examine the wording of your insurance policy to make sure that your claim is valid and presented properly in order to maximise your compensation payment.
My business interruption insurance claim has been rejected – can I bring legal action against my insurers?
If your insurance policy has a valid BI clause, then you should consider bringing action against your insurer, which Barings Law can carry out on your behalf on a no-win no-fee basis. The insurer is then likely to reconsider and pay out, or elect to proceed to a court hearing.
What if I can’t find my insurance policy documentation?
You can still start the assessment process, but you will need to contact your insurance company directly to request copies of your policy documents, such as the schedule, certificate and booklet, which they are legally obliged to give to you.
Will I owe you any money if my claim is unsuccessful?
No – we operate on a no-win no-fee basis in order to provide fair representation for clients. If your claim is unsuccessful you won’t receive any money and – providing you have been honest and not misleading – you will have nothing to pay for our services.
My business is not very big – can you still help me to make a claim?
Yes, the size of your business is not what matters, only the wording of your policy.
How do I get the process of taking action under way?
It’s a very simple process. Either call us on 0161 200 9960 to speak to one of our advisors or click here to get started.