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I thought this subject deserves its own thread as the main thread is about the virus mainly.
The Supreme Court decision is expected tomorrow on whether most insurance companies will have to pay out to SMEs for business interruption. It went through the High Court last year who ruled against the insurance companies.
Anyone else got skin in the game?
It could be a massive financial hit for some big insurance companies, big effect on shares & pensions?
Kinda, Just renewing ours and its proving tricky/costly (Supported accommodation provider) Been told the outcome might affect things (as Insurer is up to the neck in Care Home claims)
The landlords of our local pub said their insurance co had wriggled out of paying for "business interruption". It sounds like they're clinging on by the skin of their teeth but could fold if they can't reopen by Easter. Something like this could make all the difference for them.
Fingers crossed.
Anyone else got skin in the game?
It could be a massive financial hit for some big insurance companies, big effect on shares & pensions
Getting pretty dark when your hoping that the insurance companies aren't going to have to pay out. Or am I reading that wrong haha?
Actually the high court didn't rule against the insurance companies per se. They made a number of overarching judgements and told the insurers they had to compare their coverage to the rulings to determine whether or not they had to pay out.
Some policy wordings were deemed to be sufficiently worded so as to avoid having to pay out others were more ambiguous and the insurers look to be on for a good proportion (although not all) of the claims. And yes, it could send some big names under.
Note I have spent some time reading hundreds of pages of the insurer arguments and the judgement itself. The arguments for and against are technical and very complex and delve into the very heart of insurance law and policy construction. If like me you have a professional interest in such things it's quite interesting, particularly how different insurers approached the construction of their arguments.
There's quite a bit of pressure on insurers right now. Professional Indemnity for design and build (post Grenfell). PI for the legal profession and insurance brokers. Care homes. I suspect Employers Liability is going to get a pasting soon due to Covid and working from home.
The BI issue is going to see off some companies but others with better (tighter?) wordings will be fine. Some very poor reporting by the media on this issue.
As a small accommodation provider our insurer, NFU, has categorically stated we are not covered for the huge COVID losses we incurred last year. Some of their domestic policies
had woolly enough wording that they paid out.
Very few policies actually set out to cover covid. Most clearly exclude it (sounds like nfu's). The rest are somewhere inbetween. I presume the nfu wording that sort of covered it was something like their Homeworker cover? Extension to a household policy?
If there's any possibility of cover then nfu have a reputation of just paying regardless.
@Rich_s - PI underwriter / specialist broker of the very hard to place risks of 20 years. Tell me about it! Good fun though, much prefer this than scraping the barrel in a soft market...
More generally insurers beef with the BI thing is essentially two-fold; first the FCA is under pressure to act, not necessarily because (for once) BI policies have been mis-sold but more there is such a political focus coupled with media hysteria. As a consequence they are basically re-writing the Insurance Act and trying to apply a whole load of consumer safeguards from CIDRA into what is a commercial product.
Their argument being that your average SME purchasing BI is no more 'sophisticated' (their term) than a consumer buying home insurance. This is pretty much the case but the Insurance Act and the ICOBS rules as set out by the FCA make a very specific distinction between consumers (home insurance, personal motor insurance etc) and business insurance (any insurance bought in connection with the insured's trade).
Insurers are saying this is bollocks and you can't just invent a whole new category of buyer and the rules that govern them after the shit has hit the fan. They also (in their arguments to the High Court) correctly point out that the vast majority of BI policies were sold by brokers and it's not their fault the brokers haven't explained coverage properly.
There's a whole load of other arguments around quantum (the amount being claimed) with insurers pointing out that things like loss of profit is defined quite tightly and that businesses were already losing money under government guidance as opposed to legal lock down, what constitutes denial of access to premises, whether various exclusions/ extensions around specific pandemic clauses were or were not triggered etc.
Having read the FCA's specimen claim argument it's clearly been rushed and has a fair few holes in it but then some insurer responses are pretty ropey too but some are brilliant. If anyone is interested enough read the FCA's specimen case and the responses of Arch, Ecclesiastical and Hiscox for 3 different approaches to the same argument.
It will be very interesting to see how the Supreme Court rules on this. 0945 is the time tomorrow and you can tune in to Supreme Court TV to watch it live 🙂
NFU would never pay if there was any ambiguity. They’ll wriggle out of whatever they can just like the rest of them.
Obviously the policy wasn’t covid specific because it wasn’t around then. It was business interruption cover as recommended by then at their annual review last January. We’ve been with them for 14 years.
Yeah, I've been hearing the stories for a year or so. Lots of interesting layering arrangements and I heard about a big broker network's PI going up by 400+% at renewal and them snapping the hand off the market it was placed with!
Suspect we'll see a bunch of cases against brokers after tomorrow depending on exactly how the decision falls.
Sadly, I won't be watching tomorrow (!) - I'll be delivering ACII Marketing workshop all day. The audience is a mixed bag of brokers and insurers so I suspect there'll be some tales of woe either way.
@colp is this about the cafe? Are you doing the new one?
It is Rich. We didn’t go for the new one, had a good run of 15 years with the old one.
We were with RSA and the policy wording in the BI section said we were covered for notifiable diseases. RSA initially denied the claim as I couldn’t prove a case within the cafe by the time we were forced closed in March.
Just remembering more about NFU dealing with this. Initially they said we would be covered then we wouldn’t as it wasn’t a noticeable disease. They then changed that to a flat no. All this through our agent on Oban and only after me chasing them consistently.
The notifiable disease bit is usually well defined and is usually limited to a few specific named illnesses. As Covid-19 wasn't even known about when the policies were written it was not on the list of notifiable diseases hence the lack of cover.
As Covid-19 wasn’t even known about when the policies were written it was not on the list of notifiable diseases hence the lack of cover.
To be fair, the policy document from RSA just says notifiable diseases but doesn’t list individual diseases, so I’d take that as being any notifiable disease, whether known or not.
When rejecting the claim RSA didn’t reject it because COVID-19 wasn’t covered, their reason was that I couldn’t prove it was in the premises.
I'm still smarting from when the Insurance Ombudsman made me pay an escape of water claim after rain leaked in from the drainage groove in a front door. Circa 1994.
Still bitter.
15 years! Blimey. It's probably been 10-12 years since we bumped into each other at Ae. #gettingold
RSA are involved with the supreme court decision tomorrow I believe. But I suspect you'd get no cover due to winding up the business?
NFU would never pay if there was any ambiguity
That's not their reputation - although I've not been there for 7 years now.
Obviously the policy wasn’t covid specific
Yes, apologies, I was distracted putting children to bed and should have said epidemic/pandemic. But as I've said to a mate of mine who is foaming at the mouth about the test case and going to FOS, etc, he didn't buy the policy for that cover. Most (99.9%+) bought it in case their business burnt down/flooded or for another specific reason like loss of licence, or maybe salmonella or something. Most of the cover that will exist, subject to the ruling, is because the policy wording wasn't written tightly enough rather than because anyone thought they were trying to give cover for this sort of event.
Don't get me wrong - it's shit all round, but some lucky people have got cover, some haven't. And some (very few) actually bought the cover in the first place and are presumably laughing.
When rejecting the claim RSA didn’t reject it because COVID-19 wasn’t covered, their reason was that I couldn’t prove it was in the premises.
Yes this features very heavily in all the insurers arguments over coverage. I cannot remember the precise nature of RSA's submission in this respect though.
More generally a notifiable disease is one that you must notify to the authorities if you have an outbreak and again they are defined in law.
C-19 became one on 5 March 2020 and yes, there's a fair amount of technical too'ing and fro'ing over whether C-19 triggers certain BI clauses because businesses weren't necessarily closed as a result of an outbreak on or near their premises.
It's an absolute nightmare and the FCA and the courts have taken far too long to reach a conclusion on it all at the expense of businesses such as yours
Deleted as realised I was slipping into work mode and they’ll be plenty of opportunity for BI fun based conversations to have with clients tomorrow!
Get in..
Very brief summary having watched the Supreme Court live - the FCA's appeal has been allowed and the insurers' appeal dismissed. Good news hopefully for many SME's although unfortunately it does not mean BI will automatically now trigger as it depends on which insurer's wording they are under and of course too little, too late for many.
My wife works in insurance and her understanding is even if this is successful the vast majority of businesses still won't be covered. Usually there is the option to take "business interruption due to communicable or infectious diseases" cover when a policy is taken out.
As with most things insurance related people just want the cheapest price and don't add this extra.
Business interruption cover covers many aspect and customers pick the one that applies to them.
The main thing she says businesses are ignoring at the minute is business interruption due to cyber -attack. It 'won't happen to me' according to the clients she talks to.
@the-muffin-man - as I understand the Supreme Court ruling they are allowing claims to be made under denial of access to premises though in isolation from the fact they are closed due to C-19. Certain wordings - the Hiscox one being the main one - were very woolly in their construction and I think will have to respond.
Yes, pandemic pay regardless cover was an expensive optionally extra that most SME's didn't take but there does seem to be sufficient cover under at least some of the policies out there. I will be digging in to any analysis as and when it appears.
Interesting to see the share price movement immediately after the ruling of the various insurers involved. Arch are down around 1%. RSA 0.088, QBE 1.8, Eccles 0.6 and Hiscox 5.73 so you can see who investors think have the bulk of the exposure.
I’ll be dropping NFU an email shortly and see what they are saying now.
News reports of tens of thousands of businesses will get a payout makes me think that tens of thousands still won't, depending on the wording.
Fair enough that woolly policy wording has left insurers open to claims they never intended to pay. Those huge claims costs will have to be recouped somehow. I'm assuming tighter policy wording and increased premiums will follow.
Useful live feed here with some of the ins and outs of the ruling. I fear the media reaction may be a little be misleading and there is still a lot of work policyholders will have to do to claim. It is certainly good news for some however with Hiscox saying the ruling only affects 1/3 of their policies and the insureds still having to prove the financial loss there is a way to go yet.
Note interestingly Hiscox share price dropped around 6% on the news butis now trading 2.42% up from last night's close so I suspect investors are not too worried there are going to be massive pay-outs.
Had an email today from RSA saying that they have created another claim on my behalf for the second lockdown on 05/11/20
Apparently an email to follow about the first lockdown this week
one note of caution, and without wishing to dash anyone's hopes, is that the reporting of the supreme court ruling by the wider press has been a little misleading again, in the same way that it was with the original high court ruling.
lots of reports and headlines out there saying that insurers are now forced to pay BI claims due to coved 19. in reality the supreme court ruling has, to over simplify, simply upheld the high court ruling. although it's early days and the techies at all brokers and insurers are currently working their way through the various scenarios & implications
the original high court ruling was looking at some very specific BI extensions where there was ambiguity in the wordings to see if they would respond to claims that they were not originally deigned for. in reality the majority of polices didn't have these extensions in the first place (eg specified disease vs notifiable disease) or the non damage / action of public authority wordings (if covered in the policy) weren't that woolly in the first place ie 'closure as a result of incidence at insured premises'. these sections of the policy are also pretty restricted in terms of limits from £50K to £250K typically. whereas a £50-100K will be huge help to a small SME, it's likely not going to touch the sides if your £5m t/o+ business
If a claim was denied by insurers after the original high court ruling, unfortunately there is a good chance it will continue to be denied. equally, if you are fortunate to have cover from lockdown 1, if you have been through renewal since then, there is little chance of getting claims paid for lockdown 2 or 3 as all insurer have severely tightened their policy wordings in response.
one interesting point that did come our of the ruling is the over turning of the orient express vs genrali precedent, which deals with wider area damage and will have an impact on BI claims going forward
apologies if the above sounds all doom and gloom, or that i'm defending the insurers, but as a broker i've spent the past 2 days having conversations with clients who are at their wits end struggling to survive, who have now been given false hope by poor reporting
I might have another look at this now - we do have BI cover on the business my other half runs (pub/restuarant), that covers shut down due to local outbreak, pandemic, etc of notifiable disease. It does proceed to list a heap of diseases, but it's wording leading into it is vague - it is certainly not made clear if it's a list of examples, or a limited and specific list. We spoke to the insurer in lockdown 1 and they obviously said no, you're not covered here, and I thought at the time there was a case for arguing that it wasn't defined enough in the policy. Worth another look again i think...
Little update.
After months of replies from different RSA reps each time denying liability I finally got them to admit liability by providing a couple of WhatsApp messages showing that one of my employees had symptoms of Covid 19 during March 2020. They had initially insisted on proof of the disease in the premises but their fine print actually said symptoms of the disease.
After providing them with our financials for the last 2 years they came back with an offer. 15 minutes looking at their spreadsheet and adjusting their calculations to reflect realistic figures has resulted in them more than doubling their initial offer.
Definitely worth chasing up if you are in a similar position.
I had a standard RSA Shop policy based around a cafe.