Shorter Reads

Coronavirus & BUSINESS INTERRUPTION INSURANCE: can other claims be made when cover is rejected?

Some business owners are finding claims on business interruption insurance are being rejected. Might they have a claim against the insurance broker? Or other parties?

1 minute read

Published 16 April 2020

Authors

Share

Key information

  • Sectors
  • Financial services

Business owners who thought that they had cover for the business interruption caused by COVID-19 are finding in many cases that the cover is not what they expected and their claims are being rejected by their insurer.  You may wish to also read our guide to claims under business interruption insurance policies.

Do You have a claim against your insurance broker?  

It may be that if your business interruption insurance does not cover you for the consequences of the COVID-19 outbreak, you can make a claim against your insurance broker.  Each individual case will be different and will depend on the facts of the particular case.

Insurance brokers normally act as the agent of the policyholder (although usually paid by the insurer). They are regulated by the Financial Conduct Authority and are subject to the Financial Services and Markets Act 2000 and the Insurance Conduct of Business Source Book.  They are required to have “reasonable competence” (that is to perform to the standard of a competent insurance broker) and they have a duty to you of “reasonable skill and care”.  Their duties to you arise from law, regulation and from any contract you have with them. It is common for insurance brokers to act on behalf of the policyholder without there being a written contract, however in those circumstances the terms of the contract, and the duties owed by the broker to you, will be implied by law.

Their duties to you can include;

  • ascertaining your insurance needs
  • advising you about them.
  • advising you on the cover available
  • arranging the insurance cover as agreed with you
  • explaining the nature of the cover
  • advising you on the limitations of cover
  • advising you on the material information that needs to be provided to the insurer

These broker obligations arise both when you obtain the policy and when the policy is later renewed.  On renewal they should, for instance, review your needs and the extent to which they may have altered.

Failure to comply with the above duties may mean that a claim for losses can be made against the broker.

Brokers may also be open to claims if they advise you against, or fail to carry out on your behalf, a precautionary notification of your business interruption claims to insurers, or otherwise mishandle the claims process. Claims against brokers can arise where the broker has thought that you do not have cover but it has later transpired that this was incorrect and that you have lost the opportunity of making the claim because you are outside the time limits. Brokers sometimes say that they have to strike a balance in these circumstances, feeling (rightly or wrongly) that they do not want to notify the insurer of potential claims unnecessarily, in case doing so might lead to an increase in premium on renewal.

Additionally, claims can arise simply because the broker attempted to notify the insurer of a claim on your behalf but did not do so in the correct way.

Are there claims against companies and directors?

It remains to be seen whether claims against companies or their directors or other officers can be made by shareholders alleging that the company failed to acquire adequate business interruption cover (or indeed failed to adequately prepare in other respects to meet the effects of a pandemic or to adequately react to it).

Companies (or liquidators or administrators acting for insolvent companies) could potentially make claims against the companies’ directors for similar alleged failings, which might bring into play any Directors and Officers (D&O) insurance cover that the directors have.

Related latest updates
PREV NEXT

Related content

Arrow Back to Insights

Shorter Reads

Coronavirus & BUSINESS INTERRUPTION INSURANCE: can other claims be made when cover is rejected?

Some business owners are finding claims on business interruption insurance are being rejected. Might they have a claim against the insurance broker? Or other parties?

Published 16 April 2020

Associated sectors / services

  • Banking & financial disputes
  • Financial services

Authors

Business owners who thought that they had cover for the business interruption caused by COVID-19 are finding in many cases that the cover is not what they expected and their claims are being rejected by their insurer.  You may wish to also read our guide to claims under business interruption insurance policies.

Do You have a claim against your insurance broker?  

It may be that if your business interruption insurance does not cover you for the consequences of the COVID-19 outbreak, you can make a claim against your insurance broker.  Each individual case will be different and will depend on the facts of the particular case.

Insurance brokers normally act as the agent of the policyholder (although usually paid by the insurer). They are regulated by the Financial Conduct Authority and are subject to the Financial Services and Markets Act 2000 and the Insurance Conduct of Business Source Book.  They are required to have “reasonable competence” (that is to perform to the standard of a competent insurance broker) and they have a duty to you of “reasonable skill and care”.  Their duties to you arise from law, regulation and from any contract you have with them. It is common for insurance brokers to act on behalf of the policyholder without there being a written contract, however in those circumstances the terms of the contract, and the duties owed by the broker to you, will be implied by law.

Their duties to you can include;

  • ascertaining your insurance needs
  • advising you about them.
  • advising you on the cover available
  • arranging the insurance cover as agreed with you
  • explaining the nature of the cover
  • advising you on the limitations of cover
  • advising you on the material information that needs to be provided to the insurer

These broker obligations arise both when you obtain the policy and when the policy is later renewed.  On renewal they should, for instance, review your needs and the extent to which they may have altered.

Failure to comply with the above duties may mean that a claim for losses can be made against the broker.

Brokers may also be open to claims if they advise you against, or fail to carry out on your behalf, a precautionary notification of your business interruption claims to insurers, or otherwise mishandle the claims process. Claims against brokers can arise where the broker has thought that you do not have cover but it has later transpired that this was incorrect and that you have lost the opportunity of making the claim because you are outside the time limits. Brokers sometimes say that they have to strike a balance in these circumstances, feeling (rightly or wrongly) that they do not want to notify the insurer of potential claims unnecessarily, in case doing so might lead to an increase in premium on renewal.

Additionally, claims can arise simply because the broker attempted to notify the insurer of a claim on your behalf but did not do so in the correct way.

Are there claims against companies and directors?

It remains to be seen whether claims against companies or their directors or other officers can be made by shareholders alleging that the company failed to acquire adequate business interruption cover (or indeed failed to adequately prepare in other respects to meet the effects of a pandemic or to adequately react to it).

Companies (or liquidators or administrators acting for insolvent companies) could potentially make claims against the companies’ directors for similar alleged failings, which might bring into play any Directors and Officers (D&O) insurance cover that the directors have.

Associated sectors / services

  • Banking & financial disputes
  • Financial services

Authors

Need some more information? Make an enquiry below.

    Subscribe

    Please add your details and your areas of interest below

    Specialist sectors:

    Legal services:

    Other information:

    Jurisdictions of interest to you (other than UK):



    Article contributor

    Enjoy reading our articles? why not subscribe to notifications so you’ll never miss one?

    Subscribe to our articles

    Message us on WhatsApp (calling not available)

    Please note that Collyer Bristow provides this service during office hours for general information and enquiries only and that no legal or other professional advice will be provided over the WhatsApp platform. Please also note that if you choose to use this platform your personal data is likely to be processed outside the UK and EEA, including in the US. Appropriate legal or other professional opinion should be taken before taking or omitting to take any action in respect of any specific problem. Collyer Bristow LLP accepts no liability for any loss or damage which may arise from reliance on information provided. All information will be deleted immediately upon completion of a conversation.

    I accept Close

    Close
    Scroll up

    Find out about Business

    Find out about Dispute Resolution

    Find out about Individuals & Families

    Find out about Real Estate

    We are Collyer Bristow - The law firm for those that
    value individuality, creativity and collaboration.

    Legal & Pricing info Regulatory InformationAccessibilitySitemapPricing and service information

    Listen to our latest podcast: Budget Miniseries: Impacts on Families with US Connections (Part 1)

    Listen to our latest podcast: Cracking the Code on Directors’ Service Agreements

    Read our latest article: Economist, or just economical with the truth? How can employers respond to ‘fake claims’ on a CV?

    Listen to our latest podcast: Autumn Budget 2024 Special (Part 2)

    Read our latest article: ‘Promoting the integrity of the register’: The new Companies House approach to non-compliance

    ExpandNeed some help?Toggle

    < Back to menu

    I have an issue and need your help

    Scroll to see our A-Z list of expertise

    Get in touch

    Get in touch using our form below.



      Business Close
      Private Wealth Close
      Hot Topics Close