On Friday the Supreme Court handed down its decision that insurers should pay-out but there is a danger that these funds will arrive too late to save many businesses that were profitable pre-pandemic but have struggled since and which could become unviable if these pay-outs are held up.
The court’s decision was welcome news for small and medium sized businesses mainly in the retail and leisure industries which have faced significant disruption as a result of the pandemic.
The ruling, which will be used as guidance for any disputed business interruption insurance cases, could impact 700 types of policies, and 60 insurers as well as 370,000 small businesses and policyholders.
Although the judgement is largely in favour of insurance policyholders, it is also complex. As always with insurance disputes, it is crucial to look at the precise terms of any given policy to determine whether and when it would be triggered, and what losses can be claimed. Therefore, businesses should review the policy wording carefully and if necessary, seek legal advice to find out what the findings mean for their policy. For a number of businesses, the paperwork for the claims has been in place since the first lockdown.
Some policy holders are also entitled to damages for events as a consequence of not having received the insurance pay-out last spring. For example, a restaurant or retail store may have planned to invest in a new site, but could not do so because it was struggling as a result of not having received funds from its insurers, or a business’ shareholders became diluted as a result of having to take on investment from third parties as a result of the slow pay-out.
However, many small businesses will find it difficult to prove these claims unless these decisions were recorded at the time. There is therefore a danger that businesses will not receive all the compensation they are due because they do not have the resources to bring those claims and will simply settle for the loss of profits as that is easier to prove.
If you believe you have business interruption cover, it is vital that you carefully keep documentary evidence of the way in which the business has been interrupted by the Coronavirus pandemic and the amount of the losses incurred so that you can make a claim now.
New policies will no longer include these clauses or level of cover so the ability to claim for loss of profits will be narrowed and the cost of any cover is sure to increase as insurance companies look to recover the losses made on these policies.