Business Interruption Claims – When an unforeseen event forces your business to grind to a halt, the financial and emotional stress can be overwhelming. Business interruption insurance (BI) offers a vital safety net, helping businesses recover lost income and get back on track. But let’s be honest – managing the claims process, especially amid evolving legal precedents, can be an uphill battle. We simplify the complexities and offer practical advice for business owners to understand their coverage, file successful claims, and overcome challenges effectively.
Whether dealing with policy ambiguities or aiming to maximise your claim, you’ll be equipped with the insights and tools to protect your business during turbulent times.
Fast Facts: Business Interruption Claims
Recent Statistics and Data
- As of March 2023, insurers have paid out £1.5 billion to over 36,000 small businesses for business interruption claims resulting from the COVID-19 test case.
- According to data published by the FCA in March 20233, insurers have paid only 43,027 claims out of 370,000 UK business interruption insurance policyholders.
- The latest data from March 2023 shows:
- 341 claims where the insurer’s decision on validity is pending
- £294,949,957 in interim/initial payments made for 1,074 unsettled claims
- £1,406,662,310 paid out for 36,904 claims with final settlements agreed
Recent News Stories
Court of Appeal Ruling on “At the Premises” Clauses
- On September 6, 2024, the Court of Appeal handed down a judgment favouring policyholders in cases related to “at the premises” (ATP) disease wording in business interruption policies.
- This ruling is expected to provide wider coverage for COVID-19 business interruption losses.
Welsh Bar Wins £1.5m Insurance Claim Appeal
- In September 2024, the Why Not Bar in Aberystwyth won a legal case for an insurance claim of around £1.5 million related to COVID-19 lockdown losses.
- The Court of Appeal ruled that the bar and five other policyholders in the test case are eligible for compensation.
Excel Centre Case
- The Court of Appeal’s decision in the London International Exhibition Centre plc v. Allianz Insurance plc & others case in September 2024 was a significant victory for policyholders.
- It confirmed that many businesses are entitled to claim for losses sustained due to the pandemic under their existing insurance policies.
These recent developments indicate that the landscape for business interruption insurance claims in the UK continues to evolve. Courts generally rule in policyholders’ favour and expand the coverage scope for COVID-19-related losses.
What is Business Interruption Insurance?
Business interruption insurance (BI) helps businesses recover financially after disruptions caused by specific insured events. Unlike standard commercial insurance policies, which cover physical damages such as fire or theft, BI insurance focuses on income lost due to the inability to operate as usual.
What does it cover?
- Lost Revenue – Compensates for income your business would have earned during the disruption.
- Fixed Operating Expenses – Covers costs like rent, utilities, and wages that continue even when operations are halted.
- Relocation Expenses – Addresses the cost of temporarily moving the business to a new site if necessary.
Common exclusions:
- Claims for undocumented income.
- Losses resulting from events not explicitly covered in the policy, such as pandemics (unless specified in the terms and conditions).
- Delays in filing a claim could also result in rejection.
Understanding your policy’s specifics is essential. Review your policy documents to identify your coverage’s scope and the applicable exclusions.
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How to File a Business Interruption Claim
Filing a successful BI claim requires careful attention to detail and adherence to deadlines. Here’s a step-by-step guide:
Assess the Loss Event:
- Determine whether the disruption falls within the covered risks outlined in your policy.
- It might be fire damage, flood, or events like COVID-19 that depend on the exact policy wording.
Notify Your Insurer Immediately:
- Promptly inform your insurer about the event.
- Some policies include specific deadlines for reporting an incident.
Gather Essential Documentation:
- Financial Records – Provide evidence of pre-disruption income (e.g., balance sheets, profit and loss statements).
- Proof of Loss – This may include receipts, photos of physical damage, or records of operational disruptions.
- Policy Documents – Ensure you have a copy of your policy to cross-check details.
Complete the Claim Form:
- Fill out the insurer’s claim form, including all relevant details, such as the timeline of events and the estimated loss.
Work with an Insurance Adjuster and Loss Assessor:
- The insurer will assign a loss adjuster to evaluate your claim.
- You can hire a loss assessor to ensure your interests are represented.
Follow Up Regularly:
- Stay in contact with your insurer to track the claim’s progress.
- Record all communications for reference in case of disputes.
Common Challenges in Business Interruption Claims
Despite best efforts, hurdles often arise during the claims process. Here are some common challenges and suggestions to overcome them:
Policy Exclusions and Ambiguities
- Challenge: Policies may exclude specific risks (e.g., pandemics) or use vague language, leaving room for disputes.
- Solution: Seek legal advice or consult an insurance professional to clarify coverage and challenge unjust exclusions.
Disputes Over Loss Valuation
- Challenge: Insurers may dispute the financial calculations provided in your claim.
- Solution: Work with an accountant or financial expert to ensure your calculations are robust and well-supported.
Claim Denials
Challenge: Claims are occasionally denied based on technicalities or interpretation of policy terms.
Solution: File an appeal with supporting documents and consider involving a loss assessor or solicitor for further action.
COVID-19 and Its Impact on Business Interruption Claims
The pandemic highlighted gaps in traditional BI coverage, with insurance companies and policyholders grappling over the meaning of “covered events.” While legal rulings have clarified some issues, the pandemic has reshaped the industry in several ways:
Key Changes Post-COVID
- Greater Scrutiny of Policies – Insurers clearly define pandemic exclusions to avoid ambiguity.
- Emergence of Pandemic Insurance Products – Some companies have started offering add-ons specifically covering future pandemics.
- Policyholder Awareness – Businesses are more proactive in reviewing policies and seeking expert advice.
Lessons from Recent Cases
- Businesses affected by COVID-19 should reassess their policies and consider whether they can make retrospective claims based on evolving legal standards.
Tips for Maximising Your Business Interruption Claim
To increase your chances of a successful outcome, keep the following tips in mind:
Maintain Detailed Records:
- Collect comprehensive financial documents, including profit and loss statements, payroll records, and evidence of costs incurred due to the disruption.
Communicate Proactively:
- Engage with your insurer early and provide complete, organised information to avoid delays.
Consult Professionals:
- Seek advice from legal and financial experts or hire a loss assessor to represent your interests and negotiate on your behalf.
Understand Your Policy:
- Familiarise yourself with your policy’s specific terms, exclusions, and deadlines.
Future Trends in Business Interruption Insurance
Business interruption insurance will continue to evolve, driven by trends such as:
Pandemic-Specific Policies:
- Insurers are developing products that explicitly cover global disruptions to address gaps exposed during COVID-19.
Improved Policy Clarity:
- Enhanced wording will reduce ambiguities, making it easier for businesses to understand what is and isn’t covered.
Role of Technology:
- Insurtech solutions will streamline claims processes, including AI-driven risk assessments and digital claims platforms.
Rise of Customised Coverage:
- Tailored policies allow businesses to select bespoke coverage options based on their unique risk profiles.
Business Interruption Claims – Preparing for the Unexpected
Business interruption claims are an invaluable lifeline for small businesses facing unforeseen disruptions. To protect your financial stability and recover swiftly, understand your policy, stay informed about legal precedents, and seek professional guidance.
Consult legal experts or certified assessors for more guidance on business interruption insurance and advice tailored to your situation. Your preparedness today could make all the difference when the unexpected happens.
We Can Help
Oakleafe Claims have represented policyholders and managed their insurance claims since before the First World War. We have vast expertise and experience in both domestic and commercial insurance claims with thousands of satisfied policyholders who have received their deserved insurance settlement. With no upfront fees required, our internal data shows that insurance claims managed by professional loss assessors like Oakleafe can expect a settlement up to 40% higher than claims managed by the policyholder.
