Business interruption insurance claim rejections – challenge your clients’ insurers

Business interruption insurance claims have risen substantially because of COVID-19 lockdowns, and businesses across all sectors of society have been affected. 

Individuals have been subjected to restrictions on virtually all areas of their lives and businesses have been hit hard with reduced income, and despite Government support, many have, unfortunately, simply not survived.

Many struggling businesses looked to their insurance companies to support them by claiming on their business interruption policies.  Unfortunately, the insurance industry has not covered itself with glory, as many claims were rejected.  The situation was so serious that the Financial Conduct Authority (FCA) took legal action against several insurers to try and establish the extent of the policy cover and the Supreme Court judgement that resulted from the action was, in general terms, favourable for policyholders.

Despite this, a great deal of litigation has flowed.  Several hospitality-based businesses formed action groups to pursue their claims.  In the last few days, a coalition of nightclubs and other live event businesses secured a £5.2 million settlement from their insurers.

Only 60% of business interruption insurances claims have received either full or interim payments

At the beginning of July, figures released by the FCA stated that out of 40,351 business interruption claims made, 23,933 have received either full or interim payments. The obvious question of course is, what about the other 16,418 claims? 

It may well be that many of them are simply not covered, but what can a distressed business owner do to challenge the insurers’ decision?  There are complaint procedures that can be followed, including referring the issue to the Financial Ombudsman Service, but the litigation route cannot be ignored and can be the fastest way to resolve the problem and ensure the survival of the business.

Many of these 16,418 businesses are already struggling financially and are worried that they simply cannot afford to take the risk that they may lose their action and face a bill for the insurers’ legal costs. 

This is where After the Event legal expenses insurance (ATE) can be a powerful ally.

How to challenge business interruption insurance claim rejections?

Once a lawyer has assessed a case and decided that the claim is worth pursuing, an application for ATE can be made.  ATE insurance covers the claimants’ liability to pay the other side’s legal costs if the claim is unsuccessful as well as the claimants’ disbursements that are incurred in pursuing the claim.  The premium is calculated at the inception of the policy however it is not payable until the claim is settled successfully.  If the claim is lost, then the premium is not payable as it is covered by the ATE policy.

ATE insurance combined with a “no win, no fee” agreement with the law firm acting for the claimant creates a risk-free solution for any business that wants to challenge an insurer’s decision to reject their business interruption claim.

Click here to find out more about our business interruption insurance or contact us to find out more about how ATE insurance can help you challenge your business interruption insurance claim rejection.