For many holiday homeowners, and for holiday-let businesses across the UK, 2020 was a very difficult year. A brief period of reprieve after the first national lockdown - when all hospitality businesses, including holiday lets were forced to close - has not made up for the inevitable losses in income suffered as a result of the first, second and now third lockdowns.
All business owners are now pinning their hopes on the 2021 holiday sector opening up again, waiting, with optimism, for the influx of summer bookings, however, how do you mitigate against the loss of income for such an unprecedented event as this global pandemic?
If you are running your holiday let as a business then insurance against fire, flooding and other insurable property damage will be something you will no doubt have.
You might also have some basic business interruption cover for any property damage i.e. to cover loss of earnings or profit in the event of a fire. However, whilst it will hopefully never be needed, knowing it is there can be a real business saver if the property is unable to be used. Some policies also provide cover for non-property damage (often as an extension to a property damage policy) and therefore have become very relevant because of the pandemic.
Why business interruption insurance is so important
Some policies cover business losses that relate to infectious or notifiable diseases, such as COVID-19. These policies may also provide cover for non-damage denial of access and for public authority mandated closures or restrictions.
If you had to close your holiday let business because of an outbreak of a disease at, or within the vicinity of, your holiday let, or due to the government’s mandatory requirements to close, then this is where this type of business interruption insurance may be of assistance.
If cover is provided it may lead to the insurer paying out for loss of profit or loss of earnings or any additional expenditure incurred, subject to the limitations in the policy.
Making a claim
During the first lockdown one of the biggest issues facing small businesses, including registered holiday lets, was that many insurance companies were dismissing claims that businesses and individuals were bringing under their business interruption insurance.
The Financial Conduct Authority (FCA) brought a test case on behalf of small businesses to seek clarity on various policy wordings in non-property damage business interruption policies. A number of insurers co-operated with the court case and had their policy wordings tested. In particular, the case looked at how to interpret disease clauses, mixed disease and denial of access clauses (hybrids), denial of access clauses and what triggered a pay-out under the policies.
In the Supreme Court (following an appeal from the High Court), it was decided that, in the main, the High Court’s decision in favour of the policyholders was right. The Supreme Court agreed with much of what the lower court had said and went further in some aspects.
As such, insurers will potentially now have to pay out billions of pounds to those businesses who rightly claimed on their business interruption insurance, (and for those yet to claim) providing a major financial lifeline in this challenging time.
As well as giving a lifeline to small businesses that they so desperately need, the Supreme Court’s decision provides some clarity. It will be much harder for the insurer to escape responsibility for those policy wordings identical to or very similar to the ones tested in the recent case. However, this remains very much a grey area. Whilst the decision provides business owners with the confidence they need to claim, you still have to look at each policy on a case by case basis. The court also did not say how much insurers should pay out, so there will be ongoing arguments about what sums are paid out and for what period.
It is still important to look at the specific wording in each policy. This analysis will work out whether you are eligible or not. Most insurers will have been in contact with policyholders affected by the Supreme Court’s decision (as the FCA encouraged them to be pro-active) but you should not wait. You should take a pro-active step yourself and get the policy reviewed.
We can help you with making a claim
If you are thinking about claiming on your business interruption insurance then our litigation and dispute resolution experts can help you to judge whether you are likely to be successful. Alternatively, if you were recently turned down for a claim, we can review your case to see whether you are in fact due a pay-out. Either way, we’re here to support you.
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