The scandal over Business Interruption Insurance policies is hotting up, with class actions being discussed against insurance firms and the Financial Conduct Authority announcing a legal probe.
The FCA is proposing a package of measures including seeking a court ruling on whether insurers' BI products still offer value to customers and whether they can do more for those suffering a financial impact because of coronavirus - including estate and letting agents.
A number of industries are seeing the emergence of class actions against insurers allegedly failing to pay out on BI claims.
Mishcon de Reya, a law firm that has previously been active across the property industry, is reported to be acting for a group of hospitality companies against a range of insurers who have failed to pay Coronavirus-related claims.
Mishcon de Reya is also handling a group action on behalf of a number of companies against one specific insurer, Hiscox, which is allegedly failing to honour business interruption cover policies.
It is thought this latter group - known as the Hiscox Action Group and believed to include hundreds of claimants - may include property companies.
Mishcon says the disputed policy insures against financial loss arising from an inability to use an insured property due to "an occurrence of any human infectious or human contagion disease".
“Hiscox have said that they did not intend to cover what has happened. That is irrelevant. We are looking at what is in the contract. They have provided a very broad form of wording and its natural meaning would cover someone whose business was interrupted by the lockdown” says Richard Leedham, a partner in Mishcon de Reya's dispute resolution department.
Meanwhile the action by the FCA adds to the pressure on insurers to honour claims.
Christopher Woolard, interim chief executive of the FCA, says: "We have been clear that we believe in the majority of cases, business interruption insurance was not purchased to, and is unlikely to, cover the current emergency. However, there remain a number of policies where it is clear that the firm has an obligation to pay out on a policy. For these policies, it is important that claims are assessed and settled quickly. There are also some other policies where firms may consider there is no doubt about wording and decline to pay a claim, but customers may still consider there is genuine uncertainty about whether their policy provides cover.
"Our intended court action is designed to resolve a selected number of key issues causing uncertainty as promptly as possible and to provide greater clarity for all parties, both insured and insurers. It is clear that decisive action is appropriate given the severity of the potential consequences for customers.
"In addition to this court action, the current emergency has altered the value of some insurance products and we believe that insurers should be looking at both whether their products still offer value. Firms should also look at how they can help customers who may be experiencing financial difficulties as a result of the virus. Many insurers are already taking some kind of action to assist their customers and we want to see a degree of consistency for consumers. Today’s proposed guidance and statement aims to make our expectations clear to all firms in the insurance market and provide future certainty."
Earlier this week Estate Agent Today highlighted the plight of one agency in a battle with Hiscox; since that time other agencies have come forward with similar problems created by a range of insurers failing - according to the claimants - to honour the policy wording.
One agent told us:
“Like most businesses we were forced to close all our offices on Tuesday 24th March 2020, in line with the Government announcement.
“Some of our staff were already working from home as they were self isolating but we also had a number of specific individuals from each division to work from home in order to test our telephony and CRM software in a remote environment in anticipation of a lockdown.
“Thankfully we have been able to provide a modicum of service to our clients if only by way of answering queries but our ability to carry our anything like what work we would normally be expected to undertake has been considerably effected by the lockdown. No surveys can be undertaken no inspections or viewings, no market appraisals so no new instructions for either Sales or Lettings.
“We have been in discussions with our broker regarding our office insurance and making a claim for business interruption due to the pandemic and given our policy covers us in the event of infectious diseases we thought we might stand a chance
“I have today received a formal response from AXA regarding the offices business interruption claim.
“No doubt you will not be surprised by what our insurers have stated and this is likely to be the same for so many other businesses who thought they were covered but this position will remain unless somebody takes the insurers to court and they are compelled to consider the claim in a more favourable light.”
Another agent, using insurance company QBE, wrote to EAT saying:
“We have had similar issues, where our policy is not detailed or specific but advises if effected within 25 miles we are covered, nothing more.
“We have since received an email from the insurer saying we are not insured and are now contemplating a legal response as we believe this is claim avoidance rather than policy not covering as the insurer responded interpreting the terms specifically to the insurers benefit.”
And another contacted us saying:
“I have been turned down by insurers for any claim under the business interruption element of my policies.
“I have three estate agency branches and three separate policies. QBE insure two of the branches set up by brokers at Swinton insurance. The third is via Ageas.
“Ageas came back to us very quickly to turn down the responsibility of any any claim under business interruption. QBE appeared to be more considered and took longer to come back suggesting they were ‘looking in to this situation’ in more depth, although ultimately the response was the same.
“It appears to be very easy for them to refuse claims citing their interpretation of the small print in their policies. Fairly typical in my experience that insurers are happy to take the money but will do all they can to avoid paying out when claims are made.
“Personally I am not sure where to go next with this as any discussions, regardless of how heated they become, will no doubt be fruitless as it will be down to their interpretation of their policy terms.”
Earlier this week Hiscox told Estate Agent Today: “We understand these are incredibly difficult times for businesses and we are paying claims that are covered by the policies we issue fairly and quickly. We review every case individually, and if any customer has concerns about the application of their policy, we encourage them to get in touch with us directly. Where the application of a policy is disputed, our focus is on helping to provide customers with greater certainty. A fair and fast resolution is in everybody’s interests, which is why we will work with the UK insurance industry, our regulators and customers to seek an expedited resolution through the range of existing independent mechanisms.”
EAT is going to be following this story as it developers and will help agents publicise their efforts to get their contracts honoured - do please keep us informed by emailing email@example.com.
Thanks - and good luck…