Normally, it is a small or medium sized business owner who has run a pub, factory, hotel, shop, etc successfully (sometimes over many generations) until the pandemic struck and stay at home orders were incorporated into law.
Covid-19 became a notifiable disease in England and Wales from 5 March 2020.
Most businesses believed that they would benefit from BII and would be able to recover their business losses having made this part of their commercial insurance policy.
It was therefore a devasting blow when insurers started to uniformly reject claims under BII policies and continue to do so.
The Test Case
The Financial Conduct Authority (FCA) pursued a test case against eight insurers (FCA v Arch Insurance (UK) Ltd and others (2021) UKSC 1). The case considered 21 sample BII policies. Based on the sample policies considered, the Supreme Court sought to clarify which policies should pay out to business owners and which had not been triggered by the pandemic.
Overall, the test case was a landmark victory for business owners.
The main types of clauses where claim may be pursued against insurers were identified as follows:
- Disease Clauses
A disease clause generally provides insurance cover for business interruption losses caused by the occurrence of a notifiable disease at or within the vicinity of the business owner’s premises.
The Supreme Court found that such clauses were potential triggers for policyholders to recover their losses.
A notifiable disease must have come within the premises or vicinity. This will be subject to proof by specific incidents such as a staff member’s symptoms or diagnosis but may also include statistics relating to the disease such as local NHS data.
- Prevention of Access Clauses
These clauses are meant to provide insurance cover when a business is forced to close as a result of a public authority intervention.
The Supreme Court found that mandatory instructions issued by a public authority could be a valid trigger for a claim. Also, that a business owner’s inability to use their premises meant the whole or even a part of the premises.
- Hybrid Clauses
Hybrid clauses combine the main elements of disease clauses and prevention of access clauses.
Why business owners should act now?
It is imperative that business owners do not delay if they have BII insurance cover and wish to make a claim for losses incurred as a result of the pandemic. This is because:
- Many BII policies have time limits to notify claims. It is important that any such time limits are complied with.
- The test case judgment was complex and related to only 21 sample policies. Many business owners benefitted from policies which may not have been considered in the test case. The specific wording of policies must be considered carefully in each case. It is important that early advice is sought.
- Many BII policies will lapse in the event of the business ceasing to trade or entering into an insolvency arrangement. It is important that claims are initiated before such events occur.
- There is the possibility of claims against insurance brokers who may have improperly sold or processed the BII policy and time limits to such claims may apply.
Should you require any assistance with your BII claim, please do not hesitate to contact me. In suitable cases, I am willing to undertake a free review of your insurance policy and then advise on next steps. This may include entering into a no win no fee type arrangement in order to pursue business losses.
*The contents of this article does not constitute legal advice. No liability is accepted by this firm or the author personally for the article’s accuracy or the consequences of any reliance placed upon it.