Mis-sold Business Interruption Insurance Claim Compensation

admin // Covid-19 Advice


April 8  

Business insurance and the economic effect as a result of the Coronavirus will start to play an important role in the coming weeks and months as businesses take stock and try to see a way out of the economic apocalypse we find ourselves. The whole of society is affected by the outbreak of Coronavirus and measures that have taken place in order to limit its spread and impact on the world society and economy. Businesses have felt the impact most keenly with huge areas of business in effect immediately closing on a national and worldwide stage.

From pubs, clubs and restaurants through to hospitality, airlines and the leisure industry all of whom had to close their doors without much warning or planning having taken place. Staff have been furloughed or made redundant and suppliers to the industries have been suffering in a ripple effect which is steadily encompassing all businesses whether small medium or large.

Business Insurance and the Coronavirus

Business insurance including business interruption cover is normally only there in case of rare and specific adverse effects against one or a small number of businesses. For instance the flooding in the Severn Valley earlier this year, which seems so long ago, would have led to businesses who following the ingression of water would have claimed on policies for the loss of business as a result of closure to clean up following the waters subsiding.

Many insurers are now looking at the nightmare scenario of claims in relation to Covid-19 and the effects that it will have on their own business models should claims be brought against them in relation to business interruption and other forms of claims. Therefore they are positioning themselves to rebuff claims and protect their own finances.

The Association of British insurers (AIB) stated.

‘Irrespective of whether or not the government orders closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed by the Coronavirus’

‘standard business interruption cover – the type the majority of businesses purchase – does not include forced closure by authorities as it is intended to respond to physical damage at the property which results in the business being unable to trade’

‘A small minority of typically larger firms might have purchased an extension to their cover for closure due to any infectious disease. In this instance, an enforced closure could help them make their claim, but this will depend on the precise nature of the cover they have purchased’

Despite the government in Boris Johnson’s words needing to ‘step up to the plate’ the industries view will be one of declining claims.

Has your Business Insurance claim been Declined?

It is expected that firms who make claims against their insurance policy quite rightly believing that an insurance policy would cover them against losses, which of course they are sustaining will be met with not only a brick wall but an angry mob of insurers with baseball bats putting them off any form of claim.

It is vital with any claim to list concisely the details of the claim. Now is not the time for Woolly figure work. Claims should include a breakdown of the losses.

  1. Calculating the loss of income.
  2. Calculating the loss of future income.
  3. Any loss as a result of damage during the period of closure.
  4. The cost involved when bringing the business back from its period of forced rest.
  5. The cost of promoting the business when its opening is allowed.
  6. Other costs incurred in relation to the closure such as finance costs.

What is Business Insurance?

Business insurance is as by the very nature an insurance that protects your business from an event or events that occur. These relate to damage to property in a physical sense but also damage to the business by way of an event which has no physical presence but like the Coronavirus have a catastrophic effect on the business nonetheless.

Why Would your Business Insurance claim be Declined?

Policies that business insurers and any insurance company has in place will be analysed in the minutest detail. Insurers will find any way possible to avoid paying claim as the volume of claims in relation to any form of insurance but particularly business insurance is likely to be vast.

Insurers are looking at protecting their business model and the reason for their declining any claim whether valid or not is to protect this bottom line. Are they right in doing so, technically they will use terms and conditions which would suggest they are. However, morally as the Prime Minister has suggested they do have an obligation to stand behind the policies they were happy to receive premiums from business owners over the months and years gone by.

Can you Challenge the Insurer?

If you have an insurance claim which has been declined by the insurer for whatever reason it is essential that you take this forward. That does not necessarily mean that you will win but you certainly should not give up if the insurance company declines the claim. Insurers will decline for a whole host of reasons and will be running through their terms and conditions and picking out areas which they would normally overlook and rely points in the terms to avoid paying out on policy claims.

It is essential as a business owner or even as an individual that any claims that are declined as a result of the Coronavirus outbreak you challenge. You challenge not only direct to the firm but if necessary to the Financial Ombudsman so that you at the very least obtain a qualified response and a third parties review.

How has your business been affected by Coronavirus?

How have businesses been affected by the Coronavirus? In the main the vast majority have been affected in a negative way. The exceptions are the food retail outlets that have been seeing a boom, but these form a very small number against the businesses which have seen a catastrophic impact to their business almost immediately.

Moving forward the economy needs to get going. Businesses need the support from the government through the announced packages of financial relief through grants and the Coronavirus loan scheme in order that the business has any chance of surviving the Coronavirus outbreak and restrictions that have been implemented.

What is the grant relief available to businesses under Coronavirus?

The Government have introduced an incredible package of financial buffers to allow businesses the opportunity to survive and hopefully come out of the other end of the Coronavirus lockdown and provide the economy with the to be able to grow and develop. 

The packages available to help businesses include.

  1. The Coronavirus job retention scheme.
  2. The deferring of VAT payments.
  3. Deferring self-assessment payments on account.
  4. Self-employment income support scheme.
  5. Grants available to the retail hospitality and leisure businesses that pay business rates.
  6. Grants for businesses that pay little or no business rates.
  7. HMRC time to pay service.
  8. Coronavirus business interruption loan scheme (CBILS)
  9. Covid-19 corporate financing facility

What is the loan funding scheme put in place by the Chancellor of the Exchequer?

The package presented by the Chancellor of the Exchequer is vast. Just taking several elements from this we can see how huge the package of support is and the serious impact on the economy that the Coronavirus will have on it both in the present and future.

In allowing firms to furlough their staff and allow the self-employed to likewise furlough themselves the government is providing of about £30- £40 billion of wages cover each month. This has been put in place for a period of three months but there is a very real likelihood it will be extended.

In addition and showing the great significance that the Chancellor feels that the small and medium-sized businesses have, he has set up a loan scheme providing £330 billion in finance where 80% of any money is lent guaranteed by the government. That is an enormous figure and whilst it is available to all firms the banks after only two weeks are showing their true colours in stalling this essential element that the Chancellor has put in place to protect the country’s economy. Having only addressed the needs of 1% of businesses and declining the majority of applications.

We are all in the same boat.

These are unique and unusual times. Normally businesses or small sectors of business are affected for whatever reason at any given time. Going back to the last great financial shift in 2008 as a result of the banks appalling behaviour, which the Chancellor and Prime Minister have reminded them, we all bailed them out. The impact at that time on the economy was considerable. The stock market fluctuated and people’s businesses closed. However, in that economic shift in 2008 only a small portion of businesses were affected. For instance and using pubs and restaurants as an example. Those pubs and restaurants that have high borrowing could not afford to continue. So 2/10 of those businesses closed. 

However, the stronger businesses survived absorbed the trade that was left behind by the other pubs and restaurants or took over those very pubs and restaurants and life continued albeit with slightly less money in our pockets. Today 10/10 of those businesses are closed. It doesn’t matter if they were profitable, well-run, popular all are now closed. 

The impact on the economy now is frightening. However, it is the impact on how we get out of this that will be even more challenging as we are all in this together.

The Economy is split with Coronavirus.

It seems like a lifetime ago since the lockdown and the realisation too many, of the financial and social impact which took place only several short weeks ago. Many businesses are not just struggling they have lost everything. This is where the economy is split and people’s perceptions of the impact in relation to the Coronavirus on a local economy, national and international one will be.

Although all are suffering from the social impact as a result of the lockdown with children being kept off school, many individuals are financially are not worse off. They find themselves furloughed and receiving 80% of their salary. But with nowhere to spend any salary on the luxuries in life this 20% drop isn’t tremendous hardship.

There are others who are employed by local governmental the civil service as well as food retail outlets where their business hasn’t been negatively affected who financially see no difference.

Slowly as the impact of the lockdown bites and we hope a plan is formulated so that we can begin recovery these latter two groups will start to see the impact and the changes that they will have to make in the way they conduct their daily lives. Their ability to have the freedoms that they once enjoyed will be removed as many businesses will not be able to start up again. The flexibility to travel abroad is likely to contract, and the impact of job losses as we all have to repay this huge debt resulting in the bailout starts to bite.

We now live in a different world and coming out of the Coronavirus will be our greatest challenge both as an economy and society.

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