Insurers ‘looking down the barrel’ at class action

The insurance industry is under fire for failing to pay business interruption claim, according to Jonathan Compton, partner at UK law firm DMH Stallard. It follows allegations that Hiscox is trying to avoid paying out for legitimate claims, according to a group of the insurer’s SME customers.

“We are being approached by an increasing number of SMEs for advice in how to deal with insurers who are not paying out on business interruption claims,” says Compton. “These inquiries stem from the plain fact that with the COVID-19 crisis, the level of business interruption claims have risen.” 

“Hiscox, noted for its high end high risk market, is now looking down the barrel of a class or group action,” he added.

The executive director of the British Insurance Brokers’ Association (Biba), Graeme Trudgill, has commented that the insurance industry is “getting hammered” by MPs and the press over business interruption.

“The question that insurers must ask themselves is why they are coming in for such a hammering and whether the hammering is deserved,” said Compton. “Clearly they are being criticised because they are not paying out on claims brought by the small business sector.”

“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.”

In a statement, Hiscox said its core policy wordings “do not provide cover for business interruption as a result of the general measures taken by the UK government in response to a pandemic”.

It also included details on its business interruption exposure and said it believes around 10,000 of its UK SME customers have been directly impacted by mandated government closure to stop the spread of COVID-19, adding its business interruption exposure to COVID-19 is “limited in Europe” and “negligible” in its US retail business.

Hiscox has produced a realistic disaster scenario which estimates a net loss of $175m for losses emanating primarily from event cancellation, entertainment and travel in a global pandemic scenario, adding ”Hiscox is proactively paying claims for these lines of business and the claims are progressing in line with its expectations”.