Although too late for many in the on-trade, those who have survived since the pandemic hit in early 2020 and had insurance but were denied a payout may be able to stake a claim – but time is running out.
Steven Swift, director at insurance broker Sector Associates, has told The Morning Advertiser about a test case that has possibly left the door open for pubs, bars and others to set the legal wheels in motion to a successful appeal.
Swift explained BI insurance is designed to cover either turnover or gross profit if a business is closed by something that it is insured for, which traditionally would be a fire, a storm or a flood, for example, and it will pay for your reduction in gross profit while the company is closed.
However, under the BI extensions, there is some cover for if the closure comes via a disease. At the time, insurers said coronavirus was not a recognised disease for insurance purposes and turned down claims.
Test cases selected by the Financial Conduct Authority (FCA) went to court and had mixed results with a total of about 7% being successful to the tune of about £1.5bn.
Swift explained: “The policy that did pay out said ‘any notifiable disease’, so it covered Covid because it’s anything that is ‘notifiable’ and within a 25-mile radius of the premises but other policies stated a list of notifiable diseases, such as Sars, flu etc which insurers knew about over the past 20 to 30 years.
Proof of Covid
“The regulator looked at this and decided not to take those insurers to court. There was also an issue where the policy stated any notifiable disease ‘at the premises’ and again the regulator chose not to go to court because ‘how can you prove you had Covid at the premises when there was no testing for it then?’.
“Fast forward a couple of years and there’s been more than 140 different legal cases where certain restaurants or hotels or companies have taken their individual insurer to court. Some have gone for them, some have gone against, but one of the significant cases was London ExCel Centre, which wanted to challenge their insurer on the ‘At The Premises’ policy wording. A key issue in the case was whether or not the closure of businesses due to Covid-related issues was covered under insurance policies containing ‘At The Premises’ clauses.
“The judge found for the policyholder and not for the insurer, which was a big, big sea change. The insurance company said, ‘we’re going to appeal this’ but shortly before Christmas 2024, the court said ‘no, you’ve got no grounds for appeal’.”
One of the main insurance companies issued a letter recently stating it required some kind of evidence that Covid was present at the premises to be able to claim.
Therefore, Swift said pubs should:
- Find your policy documentation from 2019 and 2020
- Get it checked by your broker or your insurer and remember if it has a list of diseases on then that will not be covered under the disease section but may be covered under denial of access
- Check your emails and WhatsApp messages between you and staff members to see if anyone had symptoms of Covid in the lead up to the pubs shutting on 20 March 2020 – and that they were on the premises
- If there is no trail, potentially look at whether customers could provide proof, such as a doctor’s record, if they had symptoms of Covid at that time despite it being close to five years ago.
Swift says this should be enough to trigger a payout for a pub or bar.
Time is short
He added Sector Associates has seen about 25 policy wordings from hospitality businesses in the past two weeks and about nine of those were suitable to gain a payout.
However, time is short because if a business wants to take its insurer to court, the Limitation Act applies, which means in England, Wales and Northern Ireland, action must be taken within six years from March 2020 but that time-frame for Scottish businesses is only five years so there are only about four weeks left.
It is also useful to acknowledge, testing kits for Covid were available for the second and third lockdowns so perhaps your policy was renewed in early to mid March and you may have been covered for all three lockdowns due to having a policy that ran for an entire year from then.
Swift wrote an article that is live on the UKHospitality website that may give further clarity for those seeking compensation, you can read it here.
Alternatively, you may want to contact the team at Sector Associates to check if you have a potential claim, click here to visit their website.
