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Problems for your business with business interruption insurance?

What is business interruption insurance?

Business interruption insurance is a type of insurance that covers the loss of income and consequential losses when a business is unable to carry out business as usual. This could be caused by a natural disaster or a disease outbreak. The income loss covered may be due to disaster-related closing of the business facility or due to the rebuilding process after a disaster.

This type of cover does differ from property insurance. Property insurance will cover the physical damage of the business. 

Business interruption insurance is under the spotlight currently due to the devastating impact that Covid-19 has had on many businesses.  Some insurers have refused to pay out for business interruption caused by Coronavirus. The FCA brought action through the High Court by way of a test case for a determination on business interruption cover.  The Court has determined that many (but not all) of the sample policy wording it looked at provided cover.  Whilst the judgment may be appealed it does mean that many businesses with business interruption cover may now be entitled to be provided cover by their insurers.

The judgment will be welcomed by many businesses but it is important that the individual policy is considered against the wording of the judgment to ascertain if cover should be applied.

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How will I know if the judgment covers my policy?

The guidance set out by the recent judgment determines which policies should be interpreted as having cover.  The judgment is lengthy and you should consult with an expert insurance broker if you are unsure whether the judgment applies to your policy.

What happens if my insurer does not agree to pay out?

If your insurance policy includes the wording that the judgment determines that should benefit from cover then your insurer should pay out.  If you have experienced difficulties with your insurer, or your insurer is refusing to pay out then you should obtain advice about the next steps and legal action which can be taken.

What happens if the judgment does not cover my business?

Many businesses who remain without cover understandably will be questioning why this is the case.  It may be that some businesses have been incorrectly advised at the inception of the policy with regards to the cover required, or that the policy cover provided was inappropriate. 

Should your broker have advised you to take out business interruption cover?

In some circumstances the answer to this may be yes.  This will depend upon the nature of the instructions given by the client, the needs of the business and the circumstances at the time that advice was given.

In circumstances where business interruption cover was obtained which is not covered by the judgment it may be that the cover provided was inadequate, or that the business was not properly advised on the nature of the cover obtained or available to it.

It does not always follow that the insurance broker is negligent.  Determining whether your insurance broker may have been negligent is complex and involves an assessment of a number of factors, including; the advice given, and whether the advice was that of a reasonably competent broker, what the business would have done had business interruption cover been suggested, and the position the insured would have been in had the business obtained the insurance (i.e. has a loss been suffered which is attributable to the negligence). 

How can we help?

At Stephensons we will be offering access to a free review of your insurance policies. This review will be dealt with by Stephensons Risk Management who have over 35 years’ experience in risk management and insurance.  

They will carefully review your policy from an expert’s perspective to establish whether you may be able to make a claim under your policy, if you should be covered following the judgment, the steps that can be taken if your insurer is refusing to pay out, or if you may have a case against your insurance broker for professional negligence. 

If it seems you are eligible to make a claim they will pass it over to our legal experts who will be able to commence any legal action for you. 

To get in touch with us for more information please complete our online enquiry form or call us on 0161 696 6170.

 

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