Insurance companies in the UK are set to face legal action from small businesses after turning down business interruption claims related to the coronavirus (COVID-19) pandemic, according to reports from the Guardian.
Businesses have argued that legitimate BI claims have been refused by major insurers in the wake of the crisis.
Many insurers have changed their policy terms to rule out claims arising from the pandemic, but some sold BI policies before the outbreak that stated they would pay out for claims related to a notifiable disease.
But policyholders assert that companies such as Hiscox and Eaton Gate have refused to honour claims arising from the COVID-19 pandemic despite clear policy wording.
This also comes after the Financial Conduct Authority told the industry to suspend dividend payments to ensure customers are treated fairly.
A group of brokers and loss adjusters have since come together to explore the possibility of legal action against these insurers.
One legal adjustor told the Guardian that the government and insurers must find a solution before “a multitude of legal actions against insurers begin, and massive sums of money are wasted on legal fees.”
In response, Hiscox stated that “business interruption policies across the industry, including Hiscox’s, were not designed to cover these extraordinary circumstances.”
“Like terrorism and flood, which have government-backed insurance schemes, pandemics like coronavirus are simply too large and too systemic for private insurers to cover,” the firm added.