Following the Supreme Court’s ruling on 15 January, removals companies who took out Business Interruption (BI) insurance policies may be covered for at least part of their losses as a result of the COVID-19 pandemic, despite having had their claims rejected earlier by their insurance companies.
Although many basic BI policies taken out by removals companies will only cover losses sustained as a result of property damage and are unlikely to pay out, some do provide cover for other risks such as infectious or notifiable diseases and as a result of the ruling their insurance companies may now be required to settle claims. However, the situation is complex and every case will be different, so it’s important to talk to your insurance company if you believe you have a claim.
Not surprisingly given the huge potential cost of meeting such claims, the insurance industry is studying the situation carefully and at the time of writing – 3 February, 2021 - only one of the specialist brokers we contacted, Gauntlet Relocation Insurance Brokers, was willing to give an on the record comment as to what action policyholders should now take.
Representative Graham Puddephatt said, “If they haven’t done so already BI policyholders should contact their insurers and make a claim from 6 March, 2020, the day after the government announced that COVID-19 was a notifiable disease. Most policies pick up on a notifiable disease, whereas specified diseases, which COVID was prior to the announcement, need to be specified on the policy. The insurance company will respond with a series of questions, which will need to be carefully analysed before being answered, and I would advise policyholders to seek advice before doing so. It’s also important to include additional information to support the claim and not just rely on the answers given to the insurance company’s questions. In my experience some insurers are being deliberately obstructive and asking for information to be submitted to them in a format that suits them rather than their clients.”
The Mover spoke to one of Graham’s clients, a moving company in the north west of England, which had initially had its claim for BI rejected but has recently had the decision reversed as a result of the Supreme Court’s ruling. The company, which did not wish to be named, is now looking forward to a substantial pay-out which will help to safeguard its future and that of its workforce in the uncertain months ahead.
While the insurance industry may be reeling at the prospect of handing out what is likely to be billions of pounds to BI policyholders across all industry sectors, the Financial Conduct Authority (FCA), who brought the test case to the Court, looks determined to make sure the insurers act quickly to honour valid claims and treat their customers fairly.
In a letter to insurance company CEOs written on 22 January, the FCA made clear what it expects from the industry in relation to BI claims. The full text can be read here, but a short extract from it is below.
“We believe the Court judgments in the test case give all insurers the clarity they need to now conclude their claims processes with the large majority of their BI customers. We encourage all insurers to do so as quickly as possible. In some cases the judgment will mean that previously rejected claims (and complaints) are now valid or that the value of customers’ valid claims will have changed. We expect you to be clear on these points and on your next steps as you write to all your policyholders with affected claims or complaints over the coming week.”
It is of course true that BI policies were not originally intended to cover pandemics like COVID-19 and many insurance contracts will clearly not do so. However, the Court’s scrutiny of the wording of a representative sample of policies has proved that a significant number do or should provide cover. The success of the removals company we mentioned in the north west in having its claim for BI approved should give others in the industry the confidence to press their insurers if they believe they have a valid claim.
Despite the short-term flurry of activity in the property market - largely due to the Stamp Duty holiday - the medium-term prospects for the removals industry are likely to be rocky. Many who have been forced to close or curtail their businesses during the pandemic will be hard pressed to make ends meet and some will struggle to survive. For them, the success or failure of a BI claim could mean the difference between remaining in business or waving the white flag and calling it a day. Let’s hope the Court’s ruling and subsequent pressure from the FCA will encourage the insurance companies to protect those businesses and the hundreds of jobs that depend on them.