Business Interruption Insurance Payouts

[SHARPYWAN]

Hi,
So i am lucky enough to have a policy with QBE/Trinity with the notifiable diseases section in my policy. Following the FCA test case ruling, my insurers are now beginning to process claims under this section.
However it is not straight forward.
Good news,I am insured for loss of Revenue, not loss of profits which is great.
Bad news the notifiable disease section is cover for max of 3 months, not 12...bit sneaky.
Anyway the 3 months they are trying to say, starts on the date of the 1st case of covid-19 within a 25 mile radius which in this case is 12th Feb 2020.
However my business didn't close (wasn't interrupted) until 19th March 2020, so taking their date would in effect mean my claim is reduced to just 2 months, as there was no loss of revenue for the 1st month as we remained open.

Surely Business interruption, by it's very nature does not trigger until your business is interrupted?

Any help/advice greatly appreciated
Thanks

 

[Mr D]

Sit down with a solicitor and your full policy.

 

[Frank the Insurance guy]

Hi @SHARPYWAN

It is likely to come down to the "trigger" in the policy and whether this is when your business is first interrupted, or when the cause of the interruption first started.

I will be happy to review the policy for you and give you my thoughts? If interest, please email me your policy schedule and policy wording at [email protected]

I've done a similar exercise for other members of this forum, with both positive and negative outcomes depending on the policies.

 

[SHARPYWAN]

Hi @SHARPYWAN

It is likely to come down to the "trigger" in the policy and whether this is when your business is first interrupted, or when the cause of the interruption first started.

I will be happy to review the policy for you and give you my thoughts? If interest, please email me your policy schedule and policy wording at [email protected]

I've done a similar exercise for other members of this forum, with both positive and negative outcomes depending on the policies.

That is such a kind offer Frank, and very much appreciated. I have sent you an email with relevant information. Many thanks - Richard

 

[Opinion87]

Hi @SHARPYWAN

It is likely to come down to the "trigger" in the policy and whether this is when your business is first interrupted, or when the cause of the interruption first started.

I will be happy to review the policy for you and give you my thoughts? If interest, please email me your policy schedule and policy wording at [email protected]

I've done a similar exercise for other members of this forum, with both positive and negative outcomes depending on the policies.

Hi Frank, mind if I drop you an email too, buddy?

 

[Frank the Insurance guy]

Hi Frank, mind if I drop you an email too, buddy?

Sure - go ahead.

Ideally I would like to put something on the forum with some thoughts and ideas for everyone, but the issues and policies can vary wildly, so what applies for one business doesn't for another. Unfortunately each case I've looked at for members has been with different insurers so no common ground to put up general advice!

 

[Talay]

I am waiting for some answers from my brokers but if the insurers deny liability then it is likely both they and the broker are going on the wrong end of a large legal claim.

 

[Frank the Insurance guy]

I am waiting for some answers from my brokers

Hi @Talay - you may want to ask your broker on what basis they are acting. Depending on the insurance policy (eg. where a broker has their own "scheme" with a particular underwriter), their duty may be to the insurer and not the policyholder!

It will help to know if you are fighting the insurer with support from your broker, or fighting both the broker and insurer!

 

[MARK MARSHALL]

Hi,
So i am lucky enough to have a policy with QBE/Trinity with the notifiable diseases section in my policy. Following the FCA test case ruling, my insurers are now beginning to process claims under this section.
However it is not straight forward.
Good news,I am insured for loss of Revenue, not loss of profits which is great.
Bad news the notifiable disease section is cover for max of 3 months, not 12...bit sneaky.
Anyway the 3 months they are trying to say, starts on the date of the 1st case of covid-19 within a 25 mile radius which in this case is 12th Feb 2020.
However my business didn't close (wasn't interrupted) until 19th March 2020, so taking their date would in effect mean my claim is reduced to just 2 months, as there was no loss of revenue for the 1st month as we remained open.

Surely Business interruption, by it's very nature does not trigger until your business is interrupted?

Any help/advice greatly appreciated
Thanks[/QUOT
--------------------------------------------------------------------------------------------------------

I have a dog Boarding kennels - and we were lucky enough to have Business Interruption cover of £40,000 and it clearly states, a 12 month Indemnity and in respect of ''GROSS PROFIT''

Didnt get an issue about the acceptance, following the Court case but have issues now over the period covered and how this 'Gross Profit' is calculated.

They, ALLAY are offering 23/3/20 to 5/11/20 and want to deduct our bank charges etc from the revenue and that means we lose about £8000

My submission is that 100% of a kennels oncome is Gross Profit simply because we dont produce a product to sell. By them taking expenses off the income - they are giving us Nett Profit instead of Gross Profit.

Have I got this wrong - hoping that this scenario might help others.....

Mark Marshall 2/4/21

 

[Richard Cole]

I am with RSA and had a letter back in January saying they would get back to me within 21 days to say if I would be eligible. Not heard back from them since. Sent a formal complaint to them last week requesting they process my claim or escalate my complaint to the ombudsman.

 

[MARK MARSHALL]

I am with RSA and had a letter back in January saying they would get back to me within 21 days to say if I would be eligible. Not heard back from them since. Sent a formal complaint to them last week requesting they process my claim or escalate my complaint to the ombudsman.

---------------------------------------------------------------------------------------------------------
Richard - did your Policy contain the wording about disease at your premises, or within a 25 mile radius ? Also what period is your indemnity ?

 

[Richard Cole]

---------------------------------------------------------------------------------------------------------
Richard - did your Policy contain the wording about disease at your premises, or within a 25 mile radius ? Also what period is your indemnity ?

HI Mark, this is a copy and paste of my policy wording:

3 Disease, Murder, Suicide, Vermin and Pests Loss as a result of A) closure or restrictions placed on the Premises on the advice or with the approval of the Medical Officer of Health of the Public Authority as a result of a notifiable human disease manifesting itself at the Premises 1 Any amount in excess of £250,000 after the application of all other terms and conditions of this Insurance. B) injury or illness sustained by any customer or Employee arising from or traceable to foreign or injurious matter in food or drink sold from the Premises C) closing of the whole or part of the Premises by order of the Public Authority for the area in which the Premises are situate as a result of defects in the drains and other sanitary arrangements at the Premises D) murder or suicide occurring at the Premises E) vermin and pests at the Premises. 4 Denial of Access and Loss of Attraction Damage to Property in the vicinity of the Premises by any of the insured Events which A) hinders or prevents the use of the Premises or access to them or B) causes a fall in the number of customers attracted to the vicinity of the Premises whether the Property used by You for the purpose of the Business shall be damaged or no


I own a gift shop which in the week before the first lockdown is about `12miles from Cheltenham Gold Cup horse racing and is now believed to be responsible for spreading Covid far and wide, we were inundated with race goers that week as were most of hotels, bars, restaurants, shops in the area.

I hold out little hope of claiming anything as I know the wording on these policies can be very subjective to interpretation but the way the insurance industry has handled this and treated businesses such as mine has left me fuming!

Policy was from 01/03/2020 to 28/02/2021

 

[Richard Cole]

---------------------------------------------------------------------------------------------------------
Richard - did your Policy contain the wording about disease at your premises, or within a 25 mile radius ? Also what period is your indemnity ?

I also have another shop in the same area which had cover with AXA insurance but it specifies diseases on the policy so I think that rules out that policy completely:

Murder, suicide or disease cover We will pay you for interruption of or interference with the business during the indemnity period following 1 the occurrence of any of the following specified human infectious or human contagious diseases suffered by any person at your premises or within a one mile radius of it acute encephalitis, acute poliomyelitis, anthrax, chicken pox, cholera, diphtheria, dysentery, legionellosis, legionnaires disease, leprosy, leptospirosis, malaria, measles, meningococcal infection, mumps, opthalmia neonatorum, paratyphoid fever, plague, rabies, rubella, scarlet fever, smallpox, tetanus, tuberculosis, typhoid fever, viral hepatitis, whooping cough and yellow fever. 2 murder or suicide at your premises 3 injury or illness sustained by any person arising from poisoning directly caused by the consumption of food or drink provided at your premises 4 vermin or pests in your premises that prevents the use of the buildings by order of a public authority 5 the closing of the whole or part of your premises by order of a competent public authority as a result of a defect in the drains or other sanitary arrangements at your premises. This cover will apply for a period of up to three months beginning with the occurrence of the loss, during which the results of the business are affected as a result of murder, suicide or disease

 

[Mr D]

HI Mark, this is a copy and paste of my policy wording:

3 Disease, Murder, Suicide, Vermin and Pests Loss as a result of A) closure or restrictions placed on the Premises on the advice or with the approval of the Medical Officer of Health of the Public Authority as a result of a notifiable human disease manifesting itself at the Premises 1 Any amount in excess of £250,000 after the application of all other terms and conditions of this Insurance. B) injury or illness sustained by any customer or Employee arising from or traceable to foreign or injurious matter in food or drink sold from the Premises C) closing of the whole or part of the Premises by order of the Public Authority for the area in which the Premises are situate as a result of defects in the drains and other sanitary arrangements at the Premises D) murder or suicide occurring at the Premises E) vermin and pests at the Premises. 4 Denial of Access and Loss of Attraction Damage to Property in the vicinity of the Premises by any of the insured Events which A) hinders or prevents the use of the Premises or access to them or B) causes a fall in the number of customers attracted to the vicinity of the Premises whether the Property used by You for the purpose of the Business shall be damaged or no


I own a gift shop which in the week before the first lockdown is about `12miles from Cheltenham Gold Cup horse racing and is now believed to be responsible for spreading Covid far and wide, we were inundated with race goers that week as were most of hotels, bars, restaurants, shops in the area.

I hold out little hope of claiming anything as I know the wording on these policies can be very subjective to interpretation but the way the insurance industry has handled this and treated businesses such as mine has left me fuming!

Policy was from 01/03/2020 to 28/02/2021

If it was simply a handful of businesses claiming they would have simply processed the claims like any other claims.
The number of claims - not just from shops - and the government action means the insurance companies are looking at very bad times or even going under.
Hence delays, refusal, anything to put off closing.

I have a friend who is a senior manager in the IT department of a large insurance company. The talk is of staying afloat. Paying out all claims at once is far worse than paying out most over time.
Rob Peter to pay Paul is perhaps the common term.

 

[Frank the Insurance guy]

I am with RSA and had a letter back in January saying they would get back to me within 21 days to say if I would be eligible. Not heard back from them since. Sent a formal complaint to them last week requesting they process my claim or escalate my complaint to the ombudsman.

If there is undue delay in processing/paying the claim, you are entitled to additional compensation for the effect on your business, including interest on the amount owed/paid. The ombudsman will support you.

HI Mark, this is a copy and paste of my policy wording:

3 Disease, Murder, Suicide, Vermin and Pests Loss as a result of A) closure or restrictions placed on the Premises on the advice or with the approval of the Medical Officer of Health of the Public Authority as a result of a notifiable human disease manifesting itself at the Premises 1 Any amount in excess of £250,000 after the application of all other terms and conditions of this Insurance. B) injury or illness sustained by any customer or Employee arising from or traceable to foreign or injurious matter in food or drink sold from the Premises C) closing of the whole or part of the Premises by order of the Public Authority for the area in which the Premises are situate as a result of defects in the drains and other sanitary arrangements at the Premises D) murder or suicide occurring at the Premises E) vermin and pests at the Premises. 4 Denial of Access and Loss of Attraction Damage to Property in the vicinity of the Premises by any of the insured Events which A) hinders or prevents the use of the Premises or access to them or B) causes a fall in the number of customers attracted to the vicinity of the Premises whether the Property used by You for the purpose of the Business shall be damaged or no


I own a gift shop which in the week before the first lockdown is about `12miles from Cheltenham Gold Cup horse racing and is now believed to be responsible for spreading Covid far and wide, we were inundated with race goers that week as were most of hotels, bars, restaurants, shops in the area.

I hold out little hope of claiming anything as I know the wording on these policies can be very subjective to interpretation but the way the insurance industry has handled this and treated businesses such as mine has left me fuming!

Policy was from 01/03/2020 to 28/02/2021

Covid-19 became a notifiable disease in law on 5th March 2020, therefore this cannot be disputed by any Insurer. This policy clearly shows above that cover relates to restrictions connected to a notifiable human disease, and I would be surprised in Insurers can walk away from this.

 

[MARK MARSHALL]

If there is undue delay in processing/paying the claim, you are entitled to additional compensation for the effect on your business, including interest on the amount owed/paid. The ombudsman will support you.



Covid-19 became a notifiable disease in law on 5th March 2020, therefore this cannot be disputed by any Insurer. This policy clearly shows above that cover relates to restrictions connected to a notifiable human disease, and I would be surprised in Insurers can walk away from this.

----------------------------------------------------------------------------
I totally agree. If you lost INCOME before 5/3/20 that could be the ''trigger point'', or it could well be 5/3........Your Policy wording looks very positive.... Good luck.

 

[Frank the Insurance guy]

If you lost INCOME before 5/3/20 that could be the ''trigger point''

Based on the posters wording above, it can't be before 5th March - the trigger clearly relates to a Notifiable Disease, and that wasn't the case until 5th March.

However, I have seen an insurer try and argue the policyholders cover (which was for 3 months loss of income) commenced in February, when the first covid case was reported, even though the business was not affected until lockdown a month later! Insurers are potential reducing any claim payment by a month! Clearly anything like this should be challenged as the period of the claim cannot be before 5th March, when the law declared Covid-19 a notifiable disease.

 

[MARK MARSHALL]

Based on the posters wording above, it can't be before 5th March - the trigger clearly relates to a Notifiable Disease, and that wasn't the case until 5th March.

However, I have seen an insurer try and argue the policyholders cover (which was for 3 months loss of income) commenced in February, when the first covid case was reported, even though the business was not affected until lockdown a month later! Insurers are potential reducing any claim payment by a month! Clearly anything like this should be challenged as the period of the claim cannot be before 5th March, when the law declared Covid-19 a notifiable disease.

------------------------------------------------------------------------
This is why I have asked my questions. The Insurers ought to get together and decide on a uniformity of dates and understanding..... so that claimants are treated the same. In my scenario, that have ingored the 5/3 date and gone for 23/3 then reduced my 12 months indemnity back to 7 months and 14 days......just to try and lessen their liability. To me that is an evasion of Liability and dishonest.......?

 

[Frank the Insurance guy]

12 months indemnity back to 7 months and 14 days

What reason have they given for that!...Seems very odd, unless your business was back up and running to the expected level after that period!

 

[MARK MARSHALL]

What reason have they given for that!...Seems very odd, unless your business was back up and running to the expected level after that period!

----------------------------------------------------------------------------
Kennels are still, basically not operating - looking like June 2021 judging by phone calls. I have asked about the indemnity and await a reply......

 

[MARK MARSHALL]

I had a nice chat with my Broker today and he gave me the low down. It seems that I was fortunate in that my BII policy had the Infectious Disease section - referring to problems at my kennels or within 25miles. That is the killer wording for the Insurers.

Then we spoke about INDEMNITY and can they reduce the policies 12 months of cover to less. The answer is NO but they are trying to do so - by creating an EVENT from 23/3 until 5/11 being the Lockdowns.

Many have complained and it is looking like another Court case is needed.

As for GROSS PROFIT - check the Policy wording....Below is mine and its very specific !


Gross profit

The amount of the turnover (net of discounts allowed), closing stock and work in progress less

the amount of the opening stock, work in progress and specified working expenses.

N.B. For the purpose of this definition gross profit is as defined but the words and expressions

used will (in accordance with Note 2 above) have the meaning attached to them in your usual

accounting methods, due provision being made for depreciation of stock and work in progress.

Specified working expenses

a) 100% of purchases (less discounts received).

b) 100% of discounts allowed.

c) 100% of bad debts written off.

This is cut and pasted from the MS Amlin policy wording. Full wording attached.

Good luck people - I hope that more of you, end up covered. Mark.

 

[ImranR]

I am an independent Chartered Loss Adjuster if anyone wants free advice on individual policies. I've dealt with plenty of these do far

 

[MARK MARSHALL]

Imran.

Could you find time to comment on my scenario please.

Income from dogs, mostly cash £38,000 over 12 months.
No work in progress, no bad debt and no stock.
We do not sell a product

If I was doing a tax return, I would have allowable expenses of some £14,000

So - for the purposes of a GROSS PROFIT claim, what figure would you consider fair and in the spirit of the Policy wording - just above.

Thank you.

Mark.

 

[ImranR]

Imran.

Could you find time to comment on my scenario please.

Income from dogs, mostly cash £38,000 over 12 months.
No work in progress, no bad debt and no stock.
We do not sell a product

If I was doing a tax return, I would have allowable expenses of some £14,000

So - for the purposes of a GROSS PROFIT claim, what figure would you consider fair and in the spirit of the Policy wording - just above.

Thank you.

Mark.

Hi Mark.

Your policy should be written on a revenue/income basis because it is service based. Gross profit wordings are for businesses that have an element of "Cost of Sales". Therefore, your claim should be calculated on an income basis.

You need to calculate your loss of income minus any savings plus any increased costs. "Gross Profit" shouldn't be mentioned by the Loss Adjuster dealing with your claim.

I've dealt with a few Loss Adjusters who are calculating it incorrectly.

Feel free to send me your policy if you want me to double check

 

[MARK MARSHALL]

Hi Mark.

Your policy should be written on a revenue/income basis because it is service based. Gross profit wordings are for businesses that have an element of "Cost of Sales". Therefore, your claim should be calculated on an income basis.

You need to calculate your loss of income minus any savings plus any increased costs. "Gross Profit" shouldn't be mentioned by the Loss Adjuster dealing with your claim.

I've dealt with a few Loss Adjusters who are calculating it incorrectly.

Feel free to send me your policy if you want me to double check

---------------------------------------------------------------------------------------------------

My Policy wording, is posted above for you to read. Gross Profit is what we seek payment of ! My question is all about the calculation of same. What it includes and allowed deductions form our Income of £38k over 12 months......

 

[Frank the Insurance guy]

Your policy should be written on a revenue/income basis because it is service based. Gross profit wordings are for businesses that have an element of "Cost of Sales". Therefore, your claim should be calculated on an income basis.

It should be but isn't. The policy has been arranged on a Gross Profit basis so I can't see Insurers paying out on a loss of income basis.

@ImranR - As a loss adjuster, have you had a similar situation where cover is on a Gross Profit, but should have been loss of income? Any advice you can give to @MARK MARSHALL ?

 

[MARK MARSHALL]

Their definition of Gross Profit, is about 'turnover' which is Income. The elephant in the room, is merely, from our £38,000 of Income (2019/2020) - what can be deducted. We bought food costing £600 - so I am expecting £37,400 to be reimbursed !

 

[ImranR]

Hi Frank... Yes have had issues like this before. In the 'formula', you apply 100% as your gross profit to your income. The only issue it can create is the adequacy of cover if the sum insured is set on the accountant's GP definition.

Hi Mark...Sorry, I didn't read the full thread. I haven't scrutinised your policy or accounts but would say you need to apply 98.42% as your Rate of Gross Profit (ROGP) to the loss of turnover in the period of cover. (£37,400/£38,000).

I.e. if your loss of turnover for the 12 months indemnity period is indeed £38,000, when you apply 98.42%, your Loss of GP is £37,400.

Deduct from this overheads savings like furlough receipts, utilities charges and so forth and add any additional costs you've incurred to mitigate such as extra PPE, phone calls, postage, marketing along with what your accountant is charging to compile your claim data (insurers won't pay for your accountant to prepare a calculation or negotiate settlement).

The end figure should be your claim value. Just be careful as different Loss Adjusters are using different methodologies in their approach.

Best wishes

Imran