Why insurers are refusing to pay out during the pandemic - Rashmi Dubé

There is a sense of normality until we are reminded of the ongoing tsunami of events that is happening all around us as a result of Covid-19.

Many businesses have been forced to close and owners are wondering if they could have protected themselves from this business interruption/disruption. Many of the businesses that are suffering fall within the small medium enterprises (SME) sector.

These SME business owners support the local communities with employment, are now witnessing their businesses and livelihoods unravelling.

So why not kick the SME when they are down and present them with a demon to combat; a demon the owner of the small business has seen as their angel or protector – the insurance company?

After all, a huge proportion of businesses have for months or years being paying handsome sums to be insured with one of those clauses in the contract including business disruption/interruption, because well frankly, not everything runs like clockwork. So why are the insurance companies not paying?

Rumblings of claims against the insurance companies started when the theatres, restaurants and pubs all closed down. Business owners suffering interruption/disruption to business, most of them belonging to the SME sector, went straight to their insurance companies only to be turned away and told, “sorry this doesn’t count, it’s not covered by the contract”.

With things changing at such a rapid speed more and more businesses were forced to work from home or close all together in order to ride out the storm, insurance companies saw a huge increase in the number of claims under the same clause.

So herein lies my schizophrenia. The lawyer in me wants to say, “well this is easy just look at the contract and see what it says”; the business owner of an SME says, “of course the SME is covered, it’s an interruption/disruption to business”.’ The wording of the contract will play a significant part, but what about the ethics and what did the business believe they were being covered for?

The soar in claims and outpouring cries of injustice by the SME in recent weeks has forced The Association of British Insurers (AIB) to step into this argument and make an unequivocal statement.

“Irrespective of whether or not the Government orders closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed by the coronavirus,”

The insurance companies’ position is that standard business interruption cover does not include forced closure by authorities as it is intended to respond to physical damage at the property which results in the business being unable to trade.

The stories being told by business owners is that they simply don’t know why they are being rejected; they simply are.

One of the insurance companies is potentially facing a class action of claims.

As a lawyer, I am all too aware of the amount of costs such legal proceedings will encounter.

Court cases are not quick and with Covid-19 will probably take even longer.

In any event neither party will benefit, only the lawyers.

Wearing my other hat as a mediator, surely a more sensible approach to this matter would be to ask all those businesses wishing to make a claim to register their claim and then proceed to solution facilitated by a mediator.

However, I fear that this approach will not be taken. The insurance companies will place their stick in the ground and not move it, because they have no other alternative route.

By Rashmi Dubé Managing Director, Legatus Law

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