Complexities of business interruption insurance explained

The aim of business interruption insurance is to cover a business for loss of income where the business was unable to carry out its normal operations due to an unexpected event such as the global pandemic.

Where dealing with a simple business with readily identifiable losses, there may be no need for additional assistance. However, complicating factors, such as the impact of Coronavirus, often mean that it is difficult to distinguish between trends and losses arising from different factors. Expert input could be key to accurately quantifying your claim and achieving a fair settlement.

Information gathering to evidence the impact of the business interruption event is critical to support a successful claim. Seeking early advice will assist in the timely gathering of the required evidence and in the preparation of any claim.

The Supreme Court has recently delivered its judgment in the FCA’s business interruption insurance test case, ruling that policyholders who were ordered to close business premises during the first national lockdown in response to the Coronavirus pandemic will be able to make claims to their insurers.

Our experienced team has a wealth of experience in acting for both claimants and defendants across a wide range of industries, sectors and sizes. Our team can provide expert witness or expert advisory services, depending on the circumstances of the dispute.

Case studies

Yoga company

The claimant, a yoga company operating several yoga studios in central London, experienced a flood which resulted in the temporary closure of one of its premises, and continuing structural issues which meant the studio remained closed for some time. We were instructed by the claimant to calculate the losses suffered as a result of the flood for presentation to their insurers. Our work involved a detailed review of the claimant’s accounting records, meetings with the client and their legal advisers, and negotiations with the insurer’s forensic accountant to assist with the quantification and successful settlement of the claim.

Care homes

We were instructed by solicitors, acting for a group of companies that operate around 30 care homes in the UK, to quantify the loss of profits incurred by an entity within the group as a consequence of deficiencies in design and construction work undertaken by various firms of architects and design engineers. We were also instructed to consider the group’s funding arrangements and the impact, if any, on the quantum of the claim of the write-off of a large proportion of the group’s overdraft by the bank. This case settled with a positive outcome for our client.

Flood/fire claims against insurers

We have been instructed on numerous insurance claims where we have quantified the losses suffered by businesses as result of flood/fire damage and, in particular, the loss of the profits due to the interruption caused. Claimants we have been recently instructed by include restaurants, clothing retailers, providers of building supplies, car accident repair centres, gym/fitness centres, care homes and art galleries. Most of the organisations instructing us in these cases are owner-managed businesses. A specific example is a supplier of wood flooring to the building industry that suffered a fire at its premises, which destroyed a significant proportion of its stock. We reviewed the claimant’s accounting records and met with the client to determine how best to formulate the losses which resulted in a successful outcome for our client.