Business interruption claims

Most companies recognise the importance of having comprehensive business insurance coverage to safeguard themselves against various risks and uncertainties. Within these insurance policies, there is typically a component that provides compensation in the event of a business interruption, regardless of the cause. While physical damage to premises from incidents like fires or storms commonly triggers such coverage, it’s worth noting that many policies extend coverage beyond instances of physical damage. They also respond to situations where interruptions occur due to other factors or perils. This broader coverage ensures that businesses can receive financial support and assistance even in scenarios where physical damage may not be the sole cause of the interruption.

Business interruption insurance can provide coverage for various aspects, including:

1. Profits: Compensation based on the business’s previous months’ performance, ensuring financial stability during the interruption.
2. Fixed Costs: Coverage for operating expenses and other necessary costs incurred while the business is temporarily unable to operate.
3. Temporary Relocation: Reimbursement for the expenses associated with moving to and operating from alternate premises during the interruption.
4. Wages: Support for paying employee salaries and wages during the period when the business cannot operate.
5. HMRC Taxes: Ensuring the business can fulfil its tax obligations on time, helping to avoid penalties or financial difficulties.
6. Loan Repayments: Coverage for monthly loan repayments, allowing businesses to meet their financial obligations even when income is affected.
7. Other Expenses: Reimbursement for reasonable and essential expenses that enable the business to continue its operations during the interruption.

These coverages aim to provide financial stability, minimise disruptions, and help businesses navigate challenging times by mitigating the impact of the interruption on their cash flow and overall financial health. The specific coverage and terms will vary depending on the insurance policy and the business’s individual needs and circumstances.

If a company facing financial distress holds a valid business interruption insurance policy, creditors may have the opportunity to make claims related to the impact of the coronavirus pandemic. Following a decision by the High Court, administrators or liquidators of insolvent businesses should thoroughly examine the insurance policies held by the company to determine if a claim can be pursued against the insurer for business interruption. A successful claim would result in improved dividends for the creditors of these businesses. Secured creditors should communicate with the insolvency practitioner to inquire about the existence of such a policy and assess whether it forms part of the security portfolio, potentially influencing their position.

Even if you made the voluntary decision to close your business without being explicitly instructed by the government, you may still be eligible to make a claim for business interruption. Numerous businesses chose to suspend operations due to concerns and apprehension among customers and clients about the pandemic, which can be considered a reasonable response. Additionally, certain business types may have faced challenges in implementing and adhering to social distancing measures and the two-meter rule, leading them to prioritise the safety of their staff and customers by closing down. In such cases, a valid claim for business interruption may arise.

To obtain copies of your insurance policy documents, including the schedule, certificate, and booklet, it is necessary to contact your insurance company directly. As per legal obligations, insurers are required to provide these documents upon request. Reach out to your insurance provider and make a formal inquiry to obtain the necessary policy information. This will enable you to review and understand the terms, coverage, and conditions outlined in your insurance policy. Being familiar with the details of your policy will help you make informed decisions and ensure you have a clear understanding of your insurance coverage.