WHY INSURERS ARE REFUSING TO PAYOUT AND WHY YOU SHOULDN’T JUST ACCEPT IT
With many businesses having to shut their doors due to the ongoing restrictions imposed as a result of COVID-19, there is little doubt that many will be concerned about the significant financial impact that this global pandemic will have on their bottom line. In times of such uncertainty, many have looked, or will look, to their business interruption insurance policies in the hope that these losses can be recovered.
However, recent news reports suggest that insurance companies have adopted a blanket rejection of all business interruption claims and it has been rumoured that brokers are accepting this stance as prima facie and are advising their clients that they are not covered.
Whilst it will inevitably be the case that a large portion of businesses will not be covered, there is little doubt that there will be many companies and sole traders around the country who are either expressly or implicitly covered by their business interruption insurance. What is absolutely certain in times of such uncertainty, is the fact that the general principles of contract law, and not the decision of an insurance company, will decide if a business is covered under a business interruption insurance policy.
Whilst every policy is different, we at O’Brien Murphy Solicitors have already come across a number of policy wordings that we believe quite clearly provide cover in the current circumstances. These include quite explicit clauses that consist of words such as ‘restrictions or closures imposed’ by a ‘public’, ‘local’ or ‘government authority’, due to ‘an occurrence of a notifiable human disease’, or more implicit clauses that, due to the contra proferentem rule, might be read as providing cover during this period – an example of this might be in the form of a ‘prevention of access’ clause.
If there is a potential insurance claim, the insurance company will need to be notified of such a claim. Other provisions within the policy document will also need to be examined so that any necessary action outlined within the policy can be complied with. For example, it may be a requirement to mitigate the loss.
However, recent news reports suggest that insurance companies have adopted a blanket rejection of all business interruption claims and it has been rumoured that brokers are accepting this stance as prima facie and are advising their clients that they are not covered.
Whilst it will inevitably be the case that a large portion of businesses will not be covered, there is little doubt that there will be many companies and sole traders around the country who are either expressly or implicitly covered by their business interruption insurance. What is absolutely certain in times of such uncertainty, is the fact that the general principles of contract law, and not the decision of an insurance company, will decide if a business is covered under a business interruption insurance policy.
The contra proferentem rule
The contra proferentem rule is a legal doctrine in contract law which broadly states that if there is any ambiguity or doubt as to the meaning of a particular clause in a contract, the words will be construed against the person who drafted the contract or insisted on its inclusion. Since insurance companies generally draft the policy/contract, any ambiguous terms or phrases or clauses will be generally read against them and in favour of the insured.Whilst every policy is different, we at O’Brien Murphy Solicitors have already come across a number of policy wordings that we believe quite clearly provide cover in the current circumstances. These include quite explicit clauses that consist of words such as ‘restrictions or closures imposed’ by a ‘public’, ‘local’ or ‘government authority’, due to ‘an occurrence of a notifiable human disease’, or more implicit clauses that, due to the contra proferentem rule, might be read as providing cover during this period – an example of this might be in the form of a ‘prevention of access’ clause.
Next steps
The scale of the current health crisis will inevitably result in many insurance cover disputes over the coming months and years. To minimise exposure to expensive litigation and maximise the prospect of recovery under an insurance policy, there are a number of simple steps that businesses can take. The first step is to engage a competent solicitor who will review the relevant business interruption policy document and provide their expert legal advice and opinion as to whether or not it covers the effects of COVID-19.If there is a potential insurance claim, the insurance company will need to be notified of such a claim. Other provisions within the policy document will also need to be examined so that any necessary action outlined within the policy can be complied with. For example, it may be a requirement to mitigate the loss.
