The impact on businesses that COVID-19 has had, has been catastrophic. According to the Financial Times, around 21,000 more businesses in the UK have collapsed in March this year, compared to the same month a year ago. There has also been a drop in new companies by 23%.
We presume that these figure will only grow significantly, as lockdown and restrictive measures continue in the UK and throughout the world. With hospitality businesses being forced to shut and many others seeing a significant drop in revenue, small and medium companies are feeling the effects of coronavirus. Many have had to ask their lenders and landlords for payment holidays and / or to dismiss their staff just to keep their businesses going.
The government has introduced some business support, including the Coronavirus Business Interruption Loan scheme, which has had many applications through already. Clearly, businesses are struggling and are looking for any help available to them and with the lockdown extended to at least 8th May 2020, businesses will unfortunately continue to struggle.
PwC have estimated that UK’s 2020 growth will range from -3% to -7%, compared to 1% growth estimated pre-coronavirus crisis. This is a significant fall in growth for the UK.
On 17th March 2020, the Chancellor, Rishi Sunak stated: let me confirm that, for those businesses which do have a policy that covers pandemics, the government’s action is sufficient and will allow businesses to make an insurance claim against their policy ‘.
As such, those businesses with insurance policies which included clauses potentially allowing them to claim on their policies felt hopeful. Unfortunately, the truth is that many insurers are refusing to make payments. According to the Trade Body UK Hospitality, approximately only 1% of hospitality firms have had their insurance claims accepted.
The BBC have recently published an article on this matter with a case study from a business owner relying on an insurance policy from Hiscox.
Hiscox is one of the UK’s best known insurers, with some of their policies stating that claims can be made if businesses are unable to use their premises due to “an occurrence of any human infectious or human contagious disease, an outbreak of which must be notified to the local authority “.
On the face of it, the wording of the above clause would seem to include the current event of coronavirus pandemic.
The following also appears in the policy documents which states that the incident must be within a mile of the business, meaning that the government refuses access to those premises.
Hiscox’s lawyers are claiming that the policy does not apply in the current circumstances of coronavirus and in any event, they do not have the finances to cover all losses caused by the pandemic.
Many business owners will feel that they have been betrayed. Of course, no one could have predicted the situation we are in, however, if an insurance policy made a promise to pay out for losses caused by a pandemic, by refusing any claims, small and medium businesses are the ones taking the hit.
The above case study from the BBC is probably only one out of hundreds, with many businesses facing difficulties in bringing in claims on their insurance policies.
Our business lawyers are here to help with the impact of coronavirus on businesses. Please get in touch if you would like us to review the terms and conditions of your insurance policy and consider whether you have a claim.
If you require help or additional information, please contact one of the lawyers in our business team on 0330 107 0106 or email business@imd.co.uk.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
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