Despite last month's landmark Supreme Court ruling, which found considerably in favour of policyholders in the Financial Conduct Authority's (FCA) business interruption insurance test case relating to losses suffered due to the Coronavirus pandemic, businesses have found themselves still struggling to engage with their insurers; although a minority have begun to receive interim payouts.
"It's a mixed bag really," says Sonia Campbell, partner and head of the insurance disputes team at Mishcon de Reya, who has been working with the Hospitality Insurance Group Action (HIGA) to secure payouts for operators in the sector.
"A limited number of insurers are actively engaging with policyholders and operating in the spirit of the Supreme Court judgement and FCA guidance. And we have seen some insurers make interim payments, and move forward with the adjustment processes.
“However, others are still not doing this, and we are seeing a real delay from some insurers who are just dragging their heels."
Campbell tells BigHospitality that many businesses are not hearing back from their insurers over policy claims, while some are receiving an initial letter saying the adjustment process will begin and then getting nothing but radio silence.
“There does seem to be some disconnect," she continues.
"I don’t know if this is because of the volume of claims these insurers are having to deal with. But they have known for at least 10 months about this, and you would hope there was mechanisms and processes in place to ensure swift adjustments and process of these claims, to ensure the payments are made as quickly as possible.
“These businesses desperately need money to start flowing to them, and at the very least where these policies cover claims in principle insurers should be making interim payments without any further delay."
Troublingly, a number of operators have also been served letters of rejection over their claims from insurers in the weeks since the Supreme Court decision.
Various grey areas have arisen as insurers, businesses and legal experts scrutinise the 180-page ruling, which impacts 700 types of policy, 60 insurers, 370,000 policyholders and over £1bn in claims.
One area of contention is around the wording of disease clauses with some policies requiring the presence of Coronavirus ‘at the premises’, and others saying that Coronavirus must be present within a certain radius (typically one to 25 miles) or within a ‘vicinity’ of the business premises.
“There’s a struggle for policyholders to understand what they need to prove," says Campbell.
"And that's where we're seeing a significant lack of engagement and activity on the part of the insurers."
Another development highlighted by Michael Kill, CEO of the Night Time Industries Association (NTIA), which has been working with hospitality insurance broker NDML to secure payouts for members, is that some insurers may try to use the amount of Government support policyholders have received through grants and the furlough scheme to limit the amount businesses are able to claim.
"This has been an intense area of debate and presents a huge challenge" he explains to BigHospitality.
"It effectively means insurers would be subsidised in terms of the claim amounts being paid out, by the state."
To support policyholders the FCA has launched a policy checker that will help them find out if their insurance policy may cover business interruption losses caused by Coronavirus, and tells them what they can do next.
“The policy checker helps you to check whether the wording in your policy is the same as, or very similar to, the 21 policies in the ‘representative sample’ considered by the courts in the FCA’s test case,” the regulator tells users of the checker on its website.
“If so, the High Court and the Supreme Court rulings provide important guidance on the way your policy should be interpreted and on the strength of your claim, based on the wording of your policy.”
The only thing businesses need in order to use the checker is their insurance policy schedule.
Race to secure payouts
For many businesses, the ruling of the Supreme Court came too late, and there are concerns more operators could collapse into administration before their claims are processed.
“We know businesses that have gone into administration while the test case has been ongoing," says Campbell.
"Many insurers simply seem to be biding their time so they can analyse and pick apart the judgement to see if there’s a way they don’t have to pay."
Kill echoes Campbell words, adding that some failed business are considering further court action as a result of the prolonged inaction by their insurers.
"If someone has lost their business and is unable to claim now, they can argue the collapse is at the behest of the insurer taking them through the legal process.
"We understand there is currently a group coming together to take some of those insurers to court."
Both Campbell and Kill praise the FCA's actions, but are united in their calls for insurers to come to the table now to settle outstanding claims.
"What’s been achieved in the last 10 months is fantastic," says Campbell.
"We’re finally at a place where thousands of policyholders do now have rights to indemnity.
"What we now need to see is practical movement from the insurers, who need to stop sitting on their hands and start processing these claims and making these interim payments."
To access the FCA's policy checker, click here.