Covid-19 Business Interruption – News and Views

How has the Appeal Judgment affected you? – Contact us for a free consultation on your policy wording

We are now preparing interim and final claims for business interruption for our clients and along with our legal partners translating the legal decisions into a practical interpretation of loss assessment. If you would like advice on whether and to what extent you have cover then please contact us at info@pragmaticum.com attaching your policy schedule and policy wording for the period that includes March 2020 and we will contact you having formed an initial view.

We have seen very different approaches from insurers to date to the Supreme Court decision and expect a number of them to continue to resist fair payment by an inappropriate approach to loss adjustment of reasonable claims made. We will highlight such behaviour and present the fair and correct counter arguments on behalf of our clients.

However policyholders should be aware that cover exists only in a minority of wordings and we will not give false hope where none should exist.

21^st September 2020 – Judgement: Policyholders win on points

The dust is settling after the high court handed down its judgement on the 15^th September and the decision, as has been well reported, is on balance in favour of policyholders for claims under the disease clauses, but not so for claims under the denial of access clauses.

We must wait until the 2^nd October 2020 to see which insurers will accept the judgement and attempt to repair their battered reputations by paying genuine claimants, and those that will fight on.

After the FCA instructed insurers to communicate with their policyholders we are already finding insurers are putting a particular spin on the judgement without admitting what their future intention is. We foresee that there will undoubtedly be battles of interpretation ahead.

The time is rapidly approaching where the legal battles will give way to the need to assess the loss itself and hopefully the payment of fair compensation for business interruption. The challenges are far from over as the judgement was silent on the treatment of government Covid-19 funding. The wording in each case will be key as will the extent to which the policy meets all or only part of the losses incurred.

Pragmaticum has been in discussion with the FCA to encourage a greater clarity and communication with the public to make known the requirement that firms providing business interruption loss assessing services must be authorised (as we are). The danger of SMEs being victims of poor professional practice from those without the necessary experience and expertise is a real danger.

It is likely that not only will there be a need to properly interpret the policy in assessing the loss, but also in matching those wordings that are not specifically dealt with in the judgement, to those that that are.

What is becoming increasingly clear is that, even if there are appeals, it will not be long before the small number of specialists to assess and adjust these losses will be in great demand.

Where disputes remain, there will be an increasing reliance on the Financial Ombudsman Service (FOS) for a no cost option to resolving complaints.

Pragmaticum will be using its established relationship with senior members of FOS to understand how its new small business unit is gearing up for this challenge. Something we will report on in due course.

1^st May 2020 – The FCA takes action on policy interpretation!

We are pleased to see that the Financial Conduct Authority (FCA) has now stepped up to the plate to provide legal clarification on the interpretation of the disputed cover for business interruption in many policies.

See: FCA statement – insuring SMEs: business interruption

Having written to Caroline Wayman, chief ombudsman and chief executive of the Financial Ombudsman Service (FOS), with our views on the matter and offering to work with them in obtaining a legal interpretation, we feel we may well have been instrumental in getting this initiative off the ground and finding the FCA in the welcome but unusual position of being ahead of the game.

We will be continuing to offer our expert viewpoint to the FCA as it is important that the court determination is arrived at after proper consideration of the policyholder’s position and the expert views of those who represent them, and not just insurers and the FCA alone.

Although we are pleased that the route of Group Action that we eschewed (see below) has been stopped in its tracks, now that policy interpretation will be obtained by the FCA there still remains the issue of quantifying the value of loss at the point that the businesses concerned are allowed to re-open.

With the increasing likelihood of “liability” as a defence being removed insurers will inevitably revert to challenging the basis on which the loss is calculated.

Those unused to these matters will have to start getting used to words such as “causation”, “remoteness” and “counterfactual assumptions” being readily bandied about.

We have a clear idea on how these losses need to be assessed but we are validating these with legal advice and counsel opinion from two eminent QC’s.

24^th April 2020 – Which way to go to get business interruption paid for?

Pragmaticum is advising its clients on the interpretation of their business interruption policy wording and in particular the Public Authority or “notifiable disease” extension. We have made initial submissions where an interim assessment of business interruption loss has been made.

We are currently in discussions with a number of parties on the best option for those whose claim has been denied. At this time we favour an approach involving the Financial Ombudsman Service (FOS) with whom we have a good working relationship as a result of past political initiatives and as the presenter of complex cases to the Lead Ombudsman. Because the service is free to use and is expected to produce an early decision on how the policy wordings should be interpreted, we feel that the service should be looked at favourably.

We do not disregard the number of issues and legal arguments that will need to be considered and we are obtaining leading opinion, however initial discussions seem to concur with our own thinking. Policy holders should be aware that not only is the broad issue of cover in need of determination but also the interpretation of the cover itself, and in particular what the “but for” or comparative position is actually defined as. That is to say, is it with the assumption that the business is open for trade but the pandemic is still ongoing, or do we assume it is excluding Covid-19 as was the “normal” situation before lockdown?

Pragmaticum will be clarifying each element such that its assessment of loss will complement the legal opinion and we will be presenting the case to FOS for consideration.