The insurance industry is under fire for failing to pay business interruption claims, says Jonathan Compton, partner at law firm DMH Stallard.
“We are being approached by an increasing number of SMEs for advice on how to deal with insurers who are not paying out on business interruption claims,” he said.
“These inquiries stem from the plain fact that with the covid-19 crisis, the level of business interruption claims have risen.
“Hiscox, noted for its high-end, high-risk market, is now looking down the barrel of a class or group action. It released a statement last week (April 15) to justify its position, saying its business interruption exposure was limited due to the covid-19 emergency.”
The statement from Hiscox was in response to a threat of legal action from the Hiscox Action Group.
Jonathan said: “The recent threats from HAG and indeed others, will do nothing to improve the reputation of insurers.
RELUCTANCE
“All too often, the insured, having paid no shortage in premiums, will experience a reluctance on the part of insurers to pay out when their assistance is most needed.
“Standard tactics include (i) exceptions and limitations (ii) general attrition, the purpose of which is to wear down the claimant, along with the ‘yes, you have a valid claim, now let us look at what you can prove in terms of losses….’ routine.”
The executive director of the British Insurance Brokers’ Association (Biba), Graeme Trudgill, said recently: “The industry is getting hammered by MPs and the press over business interruption.”
But Jonathan added: “The question that insurers must ask themselves is why they are coming in for such a hammering and whether the hammering is deserved.
“Clearly they are being criticised because they are not paying out on claims brought by the small business sector.
“Sadly, all insurers have to do, in most instances, is to wait. Many of the businesses in trouble will be wound up. At this point, the claim against the insurer is in the hands of a liquidator – usually ¬- who will have limited funds to pursue the claim.
“Even if the SME survives, it is unlikely to have the funds to pursue a large and deep-pocketed insurer through the courts.”
