Lawyers are warning car dealers ‘must engage now’ to avoid missing out on Business Interruption insurance claims worth potentially millions of pounds.
Earlier this week, the FCA announced the result of a test case to clarify whether businesses should have received a pay out under policies designed to protect them from losses incurred due to the pandemic.
Some car dealers and other businesses took out cover to protect their firms against damage caused by a shut down from notifiable diseases. However, insurers have wriggled out of paying these claims because they say Covid-19 is excluded.
The FCA test case argued that policyholders should have received pay outs and some 370,000 businesses in the UK may now be able to claim.
Richard Coates, partner at legal firm Freeths, told Car Dealer in an exclusive video interview that dealers must urgently look at their policies and make a claim.
He said: ‘Most policies will include a time limit for notification of a claim.
‘If you are looking at your policy, you should very carefully look at when you should make the claim to the insurer to trigger that clause.
‘If you haven’t done so the insurer will say you haven’t done it so you’re out of time.’
The FCA test case looked carefully at the wording of policies from eight insurers on business interruption insurance. However, there are many more insurers out there who are denying claims that may now be liable.
Coates says by engaging with a lawyer now dealers may be able to use the FCA test case as a way of making insurers pay out on the business interruption insurance policies.
Coates says some dealers could receive millions in pay outs based on the money they would have made when forced to shut at the end of March.
He said: ‘It will vary massively depending on the size of the business.
‘The loss would effectively be what that business would have made, but for the pandemic.
‘I suspect for most dealers it will certainly be in the realms of tens to hundreds of thousands of pounds.’
There are two main principles the court was asked to look at, around disease clauses and those where people couldn’t access or work at their premises.
Typically this will be applicable where a dealership has taken out a ‘bolt-on policy’ to cover against these situations.
However, with the cost to insurers estimated to exceed £100m they have tried their best to avoid this where possible.
Coates explained that he had seen a number of cases where businesses have tried to claim for significant loss, but insurers have relied on ‘vague wording and the geographical spread of the disease’ and ‘whether it was a notifiable disease’ at that point.
He and the team at Freeths are now reviewing policies with clients and, although only eight insurers were part of the test case, the majority who have contacted them so far fall outside those who were tested.
Coates said: ‘If one of the eight insurers is your insurer, the FCA guidance has given them seven days to contact you to see whether or not they are now able to pay following the test case.
‘If that isn’t the case, and the FCA now thinks there might be 50 different insurers across the country with 700 different policy wordings, then lawyers instructed will have to go through the wording quite carefully to see how it relates to the judgement and what the position is.
‘I suspect this is going to be an ongoing battle for sometime where insurers are obviously keen not to pay out under policies where they don’t necessarily have to do so.’
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