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Business Interruption Insurance Claims & Covid 19

Arran Dowling-Hussey[1]& Dr. Tariq Mahmood[2]

Business interruption insurance in the eyes of many policy holders no doubt does, as a long running TV advert used to say, ‘exactlywhat it says on the tin.’  According to recent media reports the insurance companies who have written such policies have in the main disagreed.[3]One insurer was quoted as saying ‘ We understand that these are incredibly difficult times for businesses affected by Covid-19..we strive to pay claims that are covered by the policies fairly and quickly. However, general business interruption policies across the industry.. were not designed to cover these extraordinary circumstances. Like terrorism and flood, which have government-backed insurance schemes, pandemics like coronavirus are simply too large and too systemic for private insurers to cover,[4]” 

It is clear from coverage on TV, radio, online and in the print media that remarks of the type, just set out, have been a considerable surprise to many policy holders. Whilst not all insurers offer coverage of this type several do and whilst it seems well understood, by most policyholders who have been quoted in the media, that such policies are subject to a cap on any claim it does not seem accepted that Covid-19 claims fall outside the scope of the policies. Whilst the specific wording of the relevant insurance policies will vary and slight differences in phrasing and terminology will of course, in the context, be potentially very significant many who have been quoted understood their policy to provide cover where their business closed due to public health measures as a result of a notifiable disease. It is of course arguable that the recent events in most of the world from mid-March onwards has been a crisis leading to retailers being ordered to close for public health reasons due to a notifiable disease. 

Where the Covid-19 crisis, at the time of writing has been ongoing in the UK for around a month there have obviously already been claims under business interruption policies to insurers that have been refused. In other circumstances, with other claims, there can be a delay of 3-6 months or more before a holder is informed of declinature. Due to the general difficulties that all will face in their professional and personal life few who have been notified of declinature are likely to think ‘at least they told me quickly.’ Where the nature of a business, in terms of its size and scope, is such that it can survive the last month and coming months there may be a view by many ‘that I’ll talk to someone about this issue after the crisis is over.’  In 2020 whilst many would perhaps still prefer a physical face to face meeting over a matter of import most will in recent weeks have become more familiar with applications such as Zoom[5]. A discussion with a professional advisor can be had remotely. 

It seems that some policies specifically exclude claims arising from either a ‘pandemic[6]’ or since the SARs outbreak in 2003 ‘influenza-derivative[7]’ illnesses.  As stated, it does not seem that there is a universally adopted clause used across the board in all business interruption policies. It may well be that certain policies do not exclude claims of this type. For obvious reasons some policy holders who have gone through the trauma of losing their business will be unable or unwilling to pursue such a dispute with their insurer. It is suggested however that some will. 

Where a policy holder wishes to take issue with an insurers decision that has led to a declinature of a claim, they may unbeknownst to them face using arbitration. Many policy holders of whatever particular type of insurance are likely fortunate in that they have never claimed on their insurance. Others will have one or two claims on their policies over the years but perhaps more so in relation to travel or motor insurance than their business policies. In the majority of smaller value claims arising from travel, home or motor policies the policyholder will  not end up in dispute with the insurer and therefore will not especially focus on the dispute resolution process that follows once each side wishes the difference/s between them to be formally resolved. 

Arbitration is commonly used for insurance disputes albeit policy holders may not appreciate that point until they are in a dispute with their insurer. Many but not all policies will carry a dispute resolution clause that provides that disputes must be sent to an insurer. If there is a valid arbitration clause a party who has initiated litigation will usually find that the other side issues a court motion to stay the litigation in favour of arbitration. In such circumstances additional legal costs can arise which need not have been incurred. A motion to stay litigation where there is an arbitration clause between the parties will only fail in a very limited number of cases, for reasons of expedition full discussion of this issue will not be addressed in this article.

An arbitrator is an independent third party who in an adjudicative fashion hears the respective submissions from the policy holder and the insurance company and issues a final binding decision. A handful of arbitration awards will be successfully challenged and/or appealed to court in any one year. As a general rule the decision which is made will be final. 

Members of arbitrators@33BedfordRow have experience in acting both as counsel to parties involved in insurance disputes and as arbitrators hearing such cases. For more details contact m.byrne@33bedfordrow.co.uk

 


[1]Arran Dowling-Hussey is a Barrister, Arbitrator and Mediator working from 33 Bedford Row, London he can be contacted at adhussey@33bedfordrow.co.uk

[2]Dr. Tariq Mahmood is a Barrister, Arbitrator and Mediator practising from 33 Bedford Row where he is Head of Arbitration & Alternative Dispute Resolution. He can be contacted at t.mahmood@33bedfordrow.co.uk

[3]https://www.theguardian.com/business/2020/apr/12/uk-insurers-face-legal-action-from-small-firms-over-covid-19-claims(accessed April 12, 2020)

[4]Supra, note 3. 

[5]Zoom and other similar applications have seen up to 535% increase in traffic since February 2020. See inter alia https://www.bbc.com/news/business-52115434(accessed on April 12, 2020)

[6]https://www.thetimes.co.uk/article/pandemic-exclusion-clause-will-prevent-insurance-payouts-9lkfbmxm2(accessed on April 12, 2020)

[7]Supra, note 5.