Guidance on how to make a claim
The policy checker suggests that my policy may cover me for business interruption from coronavirus. What should I do next?
Policyholders in this position should approach their broker, other advisers or insurer about how to make a claim. Your policy document should include details of how to notify and make a claim.
You will need documentation to make a claim. You may need to contact an accountant to help you calculate business losses and any other amounts that may be recoverable under the policy (such as increased costs of working).
Do I need to use a CMC, lawyer or other advisor to make my claim?
Your insurer must help you make a claim and give you appropriate information on its progress. If you used an insurance broker to buy the insurance, they may also be able to help you with your claim. Your accountant or lawyer may also advise you.
When do I have to make my claim by?
You should notify your insurer as soon as possible if you believe you may have a claim under your policy. Your policy document should include details of how to notify and make a claim.
Insurers should not include the period between 17 June 2020 and the final resolution of the test case when relying on any time limits within which you must make claims that were potentially affected by the FCA’s test case or take any other step under the terms of their policies.
Insurers should also not limit any payment that may be due to you because of the elapse of that time period.
Can I still make a claim if I have cancelled my policy or my policy has expired?
Your Insurance Product Information Document and Policy Schedule should state the term of the contract, including the start and end dates. You should consider whether an insured event occurred during the period when the policy was in force. For many policyholders, the first business interruption loss that is covered under the policy is likely to have occurred in the second half of March 2020 when the Government introduced the first national lockdown.
The indemnity period is the period during which any loss you suffered may be recoverable under the policy, in accordance with its terms. It may extend beyond the renewal, expiry or termination of the policy, depending on how it is defined under the policy and whether any maximum indemnity period applies. An example definition is as follows:
Guidance on disease clauses
Disease clauses generally provide cover for business interruption losses resulting from the occurrence of an infectious or notifiable disease, like coronavirus, at or within a specified distance of the business premises. They may form part of a clause that covers other types of risk, such as business interruption caused by murder, suicide or vermin at the premises.
I have a disease clause in my policy that says that Covid must be present within a certain radius (such as 1 mile or 25 miles) of my premises. How do I prove this?
The FCA has published final guidance regarding proving the presence of coronavirus.
In order to establish whether a case of coronavirus was present so that you can claim under your policy, you should review our guidance. If you cannot establish a case within the relevant radius specified in the policy, then you may not have a valid claim.
We are working to create an online calculator to help policyholders gather two types of evidence described in the guidance: ‘Reported Cases’ and ‘Estimated Cases’ (as described in Chapters 7, 8 and 9 of the guidance). The calculator should be available soon. If you would like to use the calculator, please sign up for our BI test case email updates and you will get an email when the calculator is launched.
My policy requires the presence of coronavirus ‘at’ the premises. Am I covered?
Your insurance may include cover for disease at the premises as well as for disease within a certain distance of your premises. In this case, it is more likely that you will be able to establish a claim under the section relating to disease within a certain distance of your premises. See the questions above about those clauses.
If your policy only covers disease ‘at’ the premises, your type of policy wording was not considered in the FCA’s test case, which was not designed to resolve every possible issue under every type of policy. Your policy might nevertheless cover business interruption losses from the coronavirus pandemic in some circumstances, for example:
- There are aspects of the Supreme Court judgment that may be relevant to the interpretation of your policy and whether it provides cover. As well as the question of whether your policy potentially provides cover, you would also need to establish that coronavirus was present on your premises.
- If you suffered loss due to having to close your business temporarily for a deep clean following an incidence of coronavirus on the premises.
If you believe that you have a claim, you should approach your broker, other advisers or insurer. If you are unhappy with your insurer’s response, you can raise a complaint by pursuing issues through negotiated settlement, arbitration, court proceedings as a private party, or taking eligible complaints to the Financial Ombudsman Service (which is free).
Guidance if you have already made a claim or complaint
My claim has already been logged and declined – do I need to do anything else?
If your claim is affected by the outcome of the test case, you should hear from your insurer soon regarding what the outcome of the Supreme Court appeal means for you. If you do not hear from your insurer or you are dissatisfied with their response, you can follow up with your insurer or your broker, if you used one.
What if I am unhappy with my insurer’s response to my claim?
If you disagree with your insurer’s final decision on your claim or have not been treated fairly, you can raise a complaint by pursuing issues through negotiated settlement, arbitration, court proceedings as a private party, or taking eligible complaints to the Financial Ombudsman Service (which is free).
You can find out more about whether you are eligible to complain to the Ombudsman and the types of complaint they can help with on their website. Scroll down to the ‘business interruption insurance’ link for more information.
If you are eligible to complain to the Ombudsman, you should first complain to your insurer. The insurer should provide a final response to your complaint within 8 weeks.
If you are unhappy with your insurer’s response to your complaint and you are an eligible complainant, you may refer your complaint to the Ombudsman. You should usually do so within 6 months after the date on which you were sent a final response by your insurer.
Insurers should not include the period between 17 June 2020 and the final resolution of the test case when relying on any time limits within which you must refer complaints that were potentially affected by the FCA’s test case.
What will happen if I have already referred my complaint to the Financial Ombudsman Service?
If your complaint was potentially affected by the outcome of the FCA’s test case and put on hold by the Ombudsman, you can expect to hear from your insurer or the Ombudsman shortly now that the Supreme Court has issued its judgment.
The FCA’s test case has provided authoritative guidance for the interpretation of policy wordings in the representative sample and similar policy wordings, which the Ombudsman will take into account in looking at whether insurers are handling claims fairly.
The Financial Ombudsman Service has set out further information on their website. Scroll down to the ‘business interruption insurance’ link for more information.
What if my insurer has offered me a full and final settlement that I have accepted?
Any communications given to you by your insurer about your claim under your policy need to be clear, fair and not misleading.
If you accepted a full and final settlement offer and the related communications:
- set out the potential impact of the outcome of the FCA’s test case
- were clear, fair and not misleading
- accurately reflected what you might have been eligible to claim had you waited for the outcome of the judgment allowing you compare it with what you were offered
then the full and final settlement is likely to be binding, unless there are other circumstances suggesting otherwise.
If you accepted an offer that did not meet this requirement, then you may be able to challenge the enforceability of the settlement and seek the residual balance of the claim payment from your insurer.
How long will it take to receive claims payments?
We have set clear expectations in our guidance regarding how insurers should act and communicate with affected policyholders following the final resolution of the test case.
- reassessing all affected claims
- informing affected policyholders of the outcome of this reassessment
- making interim payments wherever possible
You can find further information in our Dear CEO letter to insurers dated 22 January 2021.
Guidance about what to claim for
What does my policy cover?
Type of cover
The type and amount of loss you can claim for under the policy depends on the policy wording including any limits or exclusions. Policies may cover loss of income or gross profit, which are likely to have defined meanings in the policy document. They may additionally cover increased cost of working caused by the insured peril.
Calculation of claim and trends clauses
The policy wording often sets out the basis on which the claim will be calculated. You may be able to find this in your policy by looking for a clause referred to as the 'Basis of Settlement' clause.
The Supreme Court judgment summarises the standard method of quantifying the sum payable in business interruption claims and the purpose of 'trends' or 'other circumstances' clauses as follows (paragraphs 253 - 254):
'The standard method used … takes an earlier period of trading for comparison purposes. In most wordings this is the calendar year preceding the operation of the insured peril. A 'standard turnover' or 'standard revenue' is derived from the turnover of the business in this period. This figure is then compared with the actual turnover or revenue during the indemnity period. The results of the business in the comparator period are also used to derive a percentage of turnover that represents gross profit. The rate of gross profit is then applied to the reduction in turnover to calculate the recoverable loss. Increase in the cost of working during the indemnity period is also typically covered.
Whilst the basic comparison between the turnover of the business in the prior period and in the indemnity period will produce a rough quantification of the lost revenue, there may be specific reasons why a higher or lower figure would be expected for the indemnity period apart from the operation of the insured peril. For example, the general trend in the business may be such as to make it likely that there would have been increased or decreased turnover during the indemnity period in any case compared with the previous year. Equally, there may be specific reasons why the turnover during the prior year was depressed, such as a strike that affected the business, or why it would be expected to have been depressed anyway during the indemnity period, such as a scheduled strike. The purpose of the trends clause is to provide for adjustments to be made to reflect 'trends' or 'circumstances' such as these. The aim is to achieve a more accurate figure for the insured loss than would be achieved merely by a comparison with the prior period and to seek to arrive at a figure which, consistently with the indemnity principle, is as representative of the true loss as is possible. The adjustment may work in favour of either the policyholder or the insurer, but it is meant to be in the interests of both.'
The terms of each policy and schedule need to be individually considered. For example, some policies only allow adjustments that increase the turnover figures. An example of a basis of settlement clause including a trends provision is set out below:
BASIS OF SETTLEMENT
The COMPANY will pay as indemnity the amount of the loss sustained by the INSURED as follows
A) In respect of the reduction in GROSS INCOME the amount by which the GROSS INCOME during the INDEMNITY PERIOD falls short of the STANDARD GROSS INCOME due to the DAMAGE …
STANDARD GROSS INCOME
the GROSS INCOME during that period in the twelve months immediately before the date of the DAMAGE which corresponds with the INDEMNITY PERIOD to which such adjustments will be made as necessary to take account of the trend of the BUSINESS and of the variations in or other circumstances affecting the BUSINESS either before or after the DAMAGE or which would have affected the BUSINESS had the DAMAGE not occurred so that the figures thus adjusted will represent as nearly as may be practicable the results which but for the DAMAGE would have been obtained during the relative period after the DAMAGE.
Where your policy uses the word 'damage' (as in the example above), the High Court decided that the term 'damage' should be read as referring to the insured peril (see para 257 of the Supreme Court judgment).
Can my insurer use the 'trend' or 'other circumstances' clause in my policy to deny my claim or reduce the amount payable because of something related to the coronavirus?
No. The Supreme Court judgment says that insurers are not permitted to use the trends clause to reduce losses by reference to other effects of coronavirus (see Parts VIII and IX of the judgment, for example, para 264). This means that, with limited exceptions, an insurer cannot deny your claim or reduce the amount payable to you on the basis that your business would have suffered other losses relating to coronavirus in addition to the insured losses you suffered.
Can my insurer use the 'trend' or 'other circumstances' clause in my policy to reduce the amount payable to reflect a downturn in the turnover of the business due to coronavirus in the days and weeks before my business was interrupted?
No. The Supreme Court judgment says that, in calculating loss, the assumption should be made that pre-trigger losses caused by the pandemic would not have continued during the operation of the insured peril. See paragraph 296 of the Supreme Court judgment.
Is there a limit on the amount I can claim?
Some policies include specific limits on the amount that may be recovered under the policy or under the particular section of the policy (a ‘sub-limit’). Sub-limits broadly limit either the period of indemnity or the amount that may be claimed (or both). An example of a sub-limit in a policy is:
- Any amount in excess of £250,000 after the application of all other terms and conditions of this Insurance.
- Any amount of the loss that continues more than twelve months after the occurrence of the loss.
If you have wording like this in your policy or schedule, then your claim payment is likely to be limited to the amount and/or period specified. This limit may apply to all claims made under the policy or it may apply separately to each claim made under the policy.
Can my insurer reduce my claim because of support that I have received from the Government?
See the information in the FCA’s Dear CEO letter dated 22 January 2021 on page 3 under the heading ‘Government support’.
What if I told my broker I wanted pandemic cover / was told that I had pandemic cover?
In some cases where there is no cover provided under the policy, there is a gap between firms’ and customers’ understanding of what they thought was covered by the policy.
If the cover provided is not consistent with:
- what the customer requested or instructed
- what the customer was informed was being provided (including in promotional material provided regarding the policy in the Insurance Product Information Document (IPID))
then customers may raise these concerns as a complaint with their insurer or broker.
Some customers may believe they have been mis-sold their policy by their insurer or broker. Where this is the case, customers can make a complaint if they are not satisfied with the product they have purchased or the outcome of their claim.
Customers who have made a complaint to their insurer or broker and remain unsatisfied can refer their complaint to the Financial Ombudsman Service. There is further information on the Financial Ombudsman Service’s website. Scroll down to the ‘business interruption insurance’ link for more information.
What if my insurer removed the business interruption cover from my policy?
You should check the date on which the cover was removed from your policy. Where it was removed after the date of the insured peril occurring, for example, after the first case of illness was discovered in your policy area or after you were prevented or restricted from accessing your premises, then the policy will still respond.
Where the cover was removed prior to the occurrence of the insured peril, you may like to check whether the change meets our expectations, which differ depending on whether the change was on ‘renewal’ or was a ‘mid-term adjustment’ – see our expectations of firms underneath the relevant heading.
What assistance is available from the Government?
The Government has several very substantial initiatives to help businesses during the pandemic, a number of which may apply to your business. These include loans on advantageous terms, cash grants, and employment protection measures. We recommend checking the UK Government website for more details and the similar pages for businesses in Northern Ireland, Scotland and Wales.