Business Interruption Insurance – do you have a claim?
Following the Chief Dental Officer’s announcement on 25th March 2020 that practices should effectively stop all face to face contact with patients, dental practices across the UK shut their doors for the foreseeable future. Naturally, many turned to their business interruption insurance policies to provide cover for the financial losses suffered as a result of the coronavirus COVID-19 pandemic.
This week the Guardian reported that insurers could face legal challenges from small business over rejected claims and that the FCA has told insurers to halt dividend payments to shareholders to ensure they can make payments to customers in respect of such policies.
Whilst the Government’s Coronavirus Job Retention Scheme (CJRS) will assist private practices fund employees’ wages and the NHS has agreed to continue contract payments (albeit it at a reduction of 20%), how will practices recuperate all of the other overheads that will continue to accrue during this period such as rent/mortgages, utilities and service contract providers?
In this article we look at whether you can claim under your insurance policy and what to do if a claim is rejected.
What is Business Interruption Insurance?
Business interruption insurance provides you with cover for loss of revenue in the event that your business is closed as a result of certain events happening, for example flood, fire or even murder.
There are limits on the amount you can claim and the period you can claim for but if you have such insurance this could save your practice during these uncertain times.
Does your policy cover pandemics?
You will need to read the wording of the policy carefully to determine if pandemics or closure as a result of Government advise are covered. Even if they do not, are there any other incidents mentioned that could potentially cover this situation? For example, denial of access or if there has been a contamination on site resulting in closure. The insurer will be quick to refuse a claim, given this is likely to result in mass payments, so consider all your options before submitting a claim.
You will then need to check what loss is covered. Some policies only provide cover if the business has suffered damage to property in addition to the loss of revenue.
Finally, are there any exclusions in respect of the cover provided, which could prevent you making a claim?
One policy that we have reviewed states that you can claim under the policy if you have been denied access or part access to your premises as a result of Government advice due to an emergency arising which is likely to endanger life. It is arguable that this would cover this situation. However, it goes on to say that if such advice has been given with 4 or more hours’ notice, no claim can be made and it does not apply to advice regarding infectious diseases.
Another example of policy term is as follows:
We will insure you for your financial losses and other items…resulting solely and directly from an interruption of your business caused by…your inability to use the venue due to restrictions imposed by a public authority during the period of insurance following…an occurrence of a notifiable human disease.
In our view, unless there is some specific exception within the policy, the current situation is likely to be covered under this type of insurance policy and a successful claim should be made.
How to challenge a rejection?
First, if the insurer has not already done so, ask for specific details of why the claim on the insurance has been rejected. Review the rejection and policy wording and consider if you have grounds to challenge.
If there are grounds to challenge you will need to exhaust any internal complaints procedure first. Set out in detail why you disagree with the decision to reject the claim, referring where possible to the policy wording.
If this is unsuccessful then you can either, make a complaint to the Financial Ombudsman Service (FOS) or issue a claim at court. Bear in mind that you can only make a complaint to the FOS if you are a small business, which is defined as a business with an annual turnover of less than £1m. Further, a complaint must be issued within 6 months of the final rejection from the insurer, so do not waste any time. The FOS can award up to £350,000 plus interest and in limited circumstances costs. If the FOS’ decision is accepted it becomes binding; if not you are free to issue a claim in the courts.
If there are a number of dental practices that have the same insurance policy wording with the same insurer then there is the option of pursuing a group litigation against the relevant insurer. Group litigation can help spread the cost of the claim, as the fees can be split equally between clients. Alternatively, if the value of the claim is sufficient, and prospects of success are good, you may be able to instruct a solicitor to act on a ‘no win, no fee’ basis.
To find out more about making a claim click here.
If you would like your insurance policy reviewed or advice on a rejection you have received, please contact our team on 0207 366 1658 or email firstname.lastname@example.org.
Laura Pearce, senior solicitor.