Insurers to face FCA in court over Covid claim denial, ACT surveys trade

The Financial Conduct Authority has turned its attention toward businesses insurers that are alleged to have skirted claims from shops, including bike retailers, in the wake of Covid-19.

The watchdog is pursuing a legal judgement on whether retailers are entitled to compensation in the case of closure due to Covid-19, whether compulsory or otherwise. Many believe insurers are utilising the ambiguity of contract wording to get out of paying on business interruption clauses

The Association of Cycle Traders has lent its support to the process, conducting a survey across its membership of stores, with around 50 said to have filed their views across the bicycle, music, book and other retail segments.

As reported in several national newspapers this week, insurers like Hiscox are already in the firing line of lawsuits. 16 insurers have thus far been named directly by the FCA. 400 small businesses are believed to be collaborating in a legal case against Hiscox.

Cycle retail was granted a special exemption in the wake of the Coronavirus’ advance in the UK, complicating matters somewhat for retailers that preferred to close in the interests of staff and customer safety. Though the move to register bike shops as an “essential business” was broadly welcomed by many shops doing a roaring trade, some are perplexed at the ramifications on insurance policies and how claims of business interruption are now graded.

One such retailer was Oxfordshire retail and hire chain Bainton Bikes and Walton Street Cycles. Owners Honour Tomkinson and Moreland told CI.N that they had called on their local MP Layla Moran to lobby Government to lean on insurers to pay out, should a retailer have been faced with a strong case to shut up shop.

Tomkinson, whose business had used broker Butterworth Spengler to access insurance, told CI.N: “We ended up staying open with minimum staff and control measures in place to reduce risk of infection after the government announced bike shop were essential, but it is quiet and business is badly effected.

“We are struggling with the larger overheads of the business such as the rent. Turnover has halved and even with the government grant times are tough. We operate within tourism too, we hire bikes and operate tours, these have all cancelled.”

Tomkinson was told in response to her claim that the business would have to report a case of the Covid-19 disease on site in order to claim business interruption.

Shops have encountered problems making claims as, up until the end of 2019, Covid-19 was not an existing condition, which has in turn enabled insurers to exclude it as being ‘novel’.

MP Mel Stride has now challenged the Association of British Insurers to clarify what changes had been made to policies since the pandemic began.

The Association of British Insurers has responded by saying: “This is an unprecedented challenge and no country in the world offers extensive pandemic insurance to business. Governments need to work with insurers on solutions to this global issue. Insurance to cover all pandemics would be too expensive for most firms to afford.”

“The stance of the ABI and its members was clear, so we identified the need to collect information to support any future lawsuits across the 100,000 retailers represented by the IRC,” Jonathan Harrison of the ACT told CI.N.

“Butterworth Spengler were particularly helpful in assisting the IRC/ACT in developing the survey and have taken up the cause of a number of retailers with the insurers on behalf of ACT and its members,” he added.

It is now expected that trails in the High Court could begin as soon as July, with a judgement compelling insurers to act according to the verdict due mere weeks later.

Retailers who feel affected by the issue are now invited to take that survey here.

In an earlier story on this subject on CI.N we incorrectly suggested Butterworth Spengler was an insurance provider itself and subject to complaints of non-payment. We will clarify that Butterworth Spengler is in fact a broker that links retailers with insurance partners, some of which are now the subject of the aforementioned survey.