Pressure is piling on insurance companies over their approach to business interruption claims amid the coronavirus outbreak.
That’s the verdict of Jonathan Compton, partner at law firm DMH Stallard, who has outlined that a number of SMEs have reached out to his firm for advice on dealing with insurers that are not paying out on claims.
“These inquiries stem from the plain fact that with the COVID-19 crisis, the level of business interruption claims have risen,” he said.
He pointed to the recent Hiscox statement in reaction to a looming lawsuit from the Hiscox Action Group (HAG), and noted that the insurer is “looking down the barrel” of a class or group action.
“The recent threats from HAG and indeed others, will do nothing to improve the reputation of insurers,” he said.
“All too often, the insured, having paid no shortage in premiums, will experience a reluctance on the part of insurers to pay out when their assistance is most needed.
“Standard tactics include (i) exceptions and limitations (ii) general attrition, the purpose of which is to wear down the claimant, along with the ‘yes, you have a valid claim, now let us look at what you can prove in terms of losses….’ routine.”
Noting BIBA executive director Graeme Trudgill’s recent comments that the industry is “getting hammered by MPs and the Press,” Compton believes insurers need to look at themselves.
“The question that insurers must ask themselves is why they are coming in for such a hammering and whether the hammering is deserved,” he said. “Clearly they are being criticised because they are not paying out on claims brought by the small business sector.
“Sadly, all insurers have to do, in most instances, is to wait. Many of the businesses in trouble will be wound up. At this point, the claim against the insurer is in the hands of a liquidator – usually - who will have limited funds to pursue the claim.
“Even if the SME survives, it is unlikely to have the funds to pursue a large and deep pocketed insurer through the courts. But there are remedies that can be pursued against ‘reluctant’ insurers.”
