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Business Interruption Insurance and The Latest From The FCA (Updated)

Business Interruption Insurance and The Latest From The FCA (Updated)


Expert view

We appreciate that due to the COVID-19 pandemic, you may find yourself looking in great detail at the wording of your insurance policy.

As the government has placed a large number of businesses on lockdown, there is a nationwide focus on business interruption insurance.

The cover provided and the conduct of insurance companies in relation to claims is a hot topic at the moment – with coverage every day in the national press. The insurance industry is under pressure to meet the expectations of consumers and businesses at this difficult time.

This article looks at the common questions raised by our clients and how Meade King can assist you. 

My business has been forced to close due to the government lockdown. I have business interruption insurance. What should I do?

Make a claim!

Contact your broker or your insurer and start the claims process. If you are advised at this stage it’s not covered and not to bother with the claims process, do not let this dissuade you.
It is likely your insurance policy requires that you make a claim as soon as possible and some insurance policies limit your cover if you do not make a claim in a timely manner.

Once you have made a formal claim, the insurer has to review your cover and your specific circumstances in full in order to decide whether you are covered.

The Financial Ombudsman Service has issued formal direction stating it expects insurers to ‘think beyond a strict interpretation of the policy terms and consider carefully what’s fair and reasonable in each case’ (see below link i) and so it is worth pursuing a claim and getting the insurer to look at your circumstances and policy and make a formal decision.

Meade King can offer support at this stage by reviewing the policy for you, point out the relevant terms and limitations of your policy to these current circumstances, and guide you as to how your insurer is likely to respond to your claim and the claims process.

My claim has been rejected. What can I do?

The first step is to challenge it officially with the insurer, especially if you believe they have interpreted the policy incorrectly, or too narrowly and are trying to avoid covering a valid claim.

Meade King can offer you support at this stage by reviewing the rejection letter from the insurer alongside your policy wording and assisting you in your formal challenge to the insurer, if there are grounds to do this. The content of the formal rejection, the explanation given by the insurer, may also provide additional ammunition on which to base a challenge.

This initial formal challenge is likely to take the form of a complaint, so the insurer will have up to 8 weeks to deal with this complaint and send a final response to it.

If you are not satisfied with the final response, then you can look to appeal this decision with the Financial Ombudsman Service. This must be done within 6 months of the final decision by the insurer (see below link ii). There is no fee to consumers for using the Financial Ombudsman Service.

I was under the impression I had adequate cover and now my claim has been rejected. What can I do?

If your claim has been rejected and you believe you were sold an unsuitable policy for your needs, you may be able to pursue a complaint of mis-selling by your broker.

If a broker was engaged to advise you on the best insurance product to buy, and made a recommendation, then they had a duty to act in your best interests and ensure the policy met your needs.

The Financial Ombudsman’s rules and procedures for consideration of a complaint are detailed in the Financial Conduct Authority’s handbook (see below link iii).

There are principles with which authorised businesses must comply (see below link iv). For example, in order to to meet Principle 6 – ‘treating customers fairly’ - the business must show it has complied with the ‘Insurance: Conduct of Business Sourcebook’ (ICOBS) (see below link v).

Just because you cannot claim on a policy does not mean that the policy has necessarily been mis-sold to you, but if you wanted to consider this option Meade King can review all the circumstances and the relevant rules and procedures from both the Financial Ombudsman and Financial Conduct Authority and advise you if a claim against your insurance broker might be worth pursuing.

Like any contractual dispute, it is possible that insurance companies and / or brokers may offer terms of settlement , even if that might be a part-refund of premiums paid.

Individual insurers may decide to retrospectively change policy terms to provide some cover, to prevent their reputation being irreparably damaged and to conserve some business for the future.

Some commentators speculate that as the heat increases on the insurance industry, which will not want to be seen as the only industry not to join in the national effort during this pandemic, it is conceivable that it could set up some sort of scheme to assist those worse beaten by the ‘small print’.

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*UPDATE*

On 1st May the FCA announced that it would be applying to the courts for declarations on certain key points that arise in a number of BII policies.

The subsequent declarations made by the courts will provide some helpful legal precedents on which our clients could decide whether to have the confidence to press on against the insurer, or not – and should also encourage some insurers to give up their resistance.

The FCA announcements in full are here:-

INSURING SMES

LEGAL CLARITY ON BII AND MEASURES TO HELP CONSUMERS AND SMES

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For a negligible fixed fee, Meade King will review your policy terms and report to you on them and advise you on your options, assisting with letters of complaint if appropriate.

For further guidance and advice, please contact Portia Garrett-Swift or Alexander Hall who will be more than happy to help you.

i) https://www.financial-ombudsman.org.uk/coronavirus

ii) https://www.financial-ombudsman.org.uk/consumers/how-to-complain

iii) https://www.handbook.fca.org.uk/handbook/DISP/3/?view=chapter

iv) https://www.handbook.fca.org.uk/handbook/PRIN/2/?view=chapter

v) https://www.handbook.fca.org.uk/handbook/ICOBS/5/?view=chapter