
Covid business interruption payments ‘still claimable’ – law firm
27 June 2024
Insolvent companies may still be owed Covid business interruption insurance payments and IPs have been urged to check policy documents for unpaid claims.
A case heard at the Court of Appeal last week seeks to determine the extent to which insurers’ ‘at the premises’ (ATP) disease clauses in business interruption insurance policies trigger payouts from losses sustained due to Covid. ATP clauses provide cover for losses due to outbreaks of a notifiable disease at a premises.
There has already been a ruling on another type of disease clause, so-called ‘radius disease clauses’, which provide cover for losses incurred due to outbreaks of a notifiable disease within a certain radius of the business.
In October 2022, London International Exhibition Centre Plc, the company that operates the Excel Centre in London’s docklands, took its insurers to court over its ATP disease cover. The ruling found in favour of the policyholders, applying the Supreme Court ruling on radius disease clauses which was made as part of an FCA test case on business interruption insurance. The insurers have appealed against the decision.
However, according to Stewarts, the law firm acting for the exhibition centre, it is not only current trading businesses that may receive payouts.
Aaron le Marquer, head of policyholder disputes at Stewarts, said: “We are seeing some cases coming to us not related to Covid at all, from the insolvency practice. In some cases the refused insurance payout may have been a significant factor, if not the driving factor, of insolvency.
“We know from the data that there are many unpaid claims out there and there's a lack of awareness in the IP community that they can still be pursued post-insolvency, four years after the event when the losses were suffered.”
Le Marquer added that additional claims for consequential losses or damages above the insurance claim have not yet been litigated.
Hundreds of thousands of business interruption claims made during Covid-19 have not been paid out, with approximately 43,000 claims of an estimated 370,000 resolved. Once the appeal judgment is handed down in the ATP Test case, it is expected to clarify the wording required for insurers to pay out.
Policyholders first complained to the financial ombudsman that they had been wrongfully denied payment for business interruption insurance in 2020. Following the complaints, the FCA brought a test case to the High Court to determine what wording would constitute a valid claim. The case later went to the Supreme Court where the court found in favour of policyholders.
Alex Jay, partner and head of insolvency and asset recovery at Stewarts said: It’s worth noting that the courts have been fairly open minded about what insurers ought to be responsible for in the context of major claims recently. There have been a number of cases where the court have sided with claimants as opposed to the insurers, finding that insurers ought to be responsible for a share of the financial burden of the pandemic in the right circumstances.
Jay said that some types of businesses, particularly hospitality, leisure and retail are more likely to possess valid claims, and if IPs are appointed over such a business it would be sensible to check policy documents for unpaid claims.
Ed Brittain, head of restructuring and resolution at Howden insurance brokers said: "As recent court rulings are bringing increased clarity to coverage provided by business interruption insurance policies it is possible that an insolvent company did have a declined insurance claim based on the insurers original view of the policy definition of 'at the premises' wording that the insurer may now have to reconsider.
"The starting point to ascertain if an insolvent company had a declined claim would be to ask the pre-insolvency event broker/insurer for a claims history that includes all claims submitted by the company that includes the period 2020 to 2021."
The judgment is expected later this year, but litigation continues, with other matters relating to business interruption insurance, such as deductions to insurance payments as a result of furlough, due back in court again next year.