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Covid-19 Business Interruption Court Case Judgment

pexels-photo-1000740On Tuesday 15th September the High Court handed down judgment against insurers in the Covid-19 Business Interruption case, meaning that there may be cover for claims which previously were not thought to be recoverable.

It is likely insurers will appeal to the Supreme Court, but in the meantime anyone with Business Interruption insurance should consider submitting a claim as soon as possible if they haven’t already so that their case can be reviewed in full and on its own merits.

We will be in contact with all of our affected clients within the next seven days if we haven’t already heard from you to make sure that you are aware of the developments and how they are likely to affect you.

More information can be found on the FCA website:

https://www.fca.org.uk/news/press-releases/result-fca-business-interruption-test-case

Any businesses looking to re-open after being shut down should give due consideration to the risk of legionella to their water system.

“Simply reopening a building that has stood idle, without addressing the safety of its water system, is unacceptable and is likely to be in breach of the law.

“Buildings that have remained empty with static water systems, or those that have been subject to flushing that does not represent normal usage, are likely to require recommissioning.

“For very simple buildings flushing alone may be sufficient but for most buildings some form of disinfection is likely to be needed.”

Advice quoted from comprehensive document provided by the Legionella Control Association

Legionella Control Flowchart

Happy Retirement Gary!

Amidst the chaos of the lockdown and the resultant alterations to the way we have been working we are slightly late in wishing our director Gary Camplin a long and happy retirement!

Gary and our MD Carole Camplin purchased Hoyland Insurance Brokers in 1999 and in his 20 years at the company oversaw growth in turnover of over 66%.

He has built lasting relationships with clients and insurers alike and will no doubt keep in touch with the friends he has made over the years.

He will be passing on his commercial book of business to his son, Scott, and will be spending some well-earned hours on the golf course now that they have re-opened!

Covid-19 and Business Interruption Cover

The majority of insurers will not cover business interruption as a result of Coronavirus (Covid-19) whether the Government forces closure or not.

Those that do give cover will generally only cover losses due to a case of the disease occurring in an employee or customer that has been at their premises, and cover will only be the lost profits while the site is closed for cleaning – cleaning costs are also usually excluded.

A minority of insurers have a wording that states they will cover any infectious disease the authorities must be notified of, or specifically reference the Health Protection (Notification) Regulations 2010. These regulations were updated by the Government on 6th March to include Covid-19, meaning that GPs must report all cases to Public Health England.

Most insurers exclude Covid-19 by stipulating they will cover the list of the diseases which before this month were listed on that legislation, as opposed to covering “diseases notifiable under the Health Protection (Notification) Regulations 2010”.

If you would like any more information or advice please feel free to get in contact on 01226 744716.

A statement on this from the Association of British Insurers is shown below.

ABI statement

Do you need business interruption insurance?

Business interruption (BI) cover can be included in most property or commercial combined policies, but it remains an often-overlooked area of cover, until it is needed!

Imagine your business has a fire which destroys half of your stock. Your property insurance should pay the replacement cost of the stock, but what if the customer can’t wait the additional lead time of the stock to arrive and you lose out on their business?

Or imagine a piece of machinery is damaged after an electrical surge or after being hit by a forklift truck. You may have excellent property cover that will pay for you to replace the damaged plant but what if it is not an “off-the-shelf” product and has to be manufactured specifically for you, or perhaps shipped from overseas? In the meantime, you may have to either outsource work to a competitor just to stop your customers going to them directly, or may have to run overtime for a few weeks after you are back up and running to catch up on orders.

BI cover insures your financial loss that has occurred as the result of property damage, for which you have property insurance. (In insurance terms this is often referred to as “consequential loss”.) It can insure a loss in profit, increased costs of working, or both.No alt text provided for this image

It is often included as standard in commercial policies, so it is worth checking your existing cover to see if this is the case and to see if the cover is adequate.

Sometimes an insurer will only include “Increased Costs of Working” as standard, which as the name suggests covers additional costs incurred to keep the business running and prevent you from losing even more money.

If they provide insurance on a Gross Profit basis then not only should you check the figure provided, but make sure the Indemnity Period is sufficient. Often this will be 12 months by default, but make sure you consider if you had a devastating fire or flood claim would you realistically be completely back to ordinary trading 12 months on? A lot of the time 24 months or even 36 months can be more appropriate depending on the size and nature of your business.

Some insurers can also include extensions to cover which would not usually be covered such as your financial losses as a result of losses your suppliers or customers suffer, but these are not always included as standard and so it is something you should discuss when reviewing your cover.

If you would like further information regarding business interruption insurance and the options when selecting the right protection for you please get in touch.

Property Owners’​ and Landlord Insurance

From multi-million-pound portfolios to single properties rented out, it is important to make sure your investment is properly protected in the event of a claim.

Often it is very tempting to take up a mortgage provider on their offer of providing cover but these policies rarely give value for money. Alternatively, it can be tempting to look on a comparison website to get a quick policy so that the solicitors can tick that box – again, if you don’t understand the cover you are purchasing it can make a claim a much more memorable experience for all the wrong reasons.

Property Owners’ insurance is one of the most competitive lines of business and as a result if you haven’t in the last few years it is definitely worthwhile shopping around to see what is available to you.

A Property Owners’ policy will include cover for the building itself, and in addition can cover landlord’s contents, potential legal expenses, and any loss of rent you suffer as the result of a claim on the property element of the policy.

Not all policies are the same and it is vital to check a policy’s exclusions carefully.

One of the most important areas that should be checked before taking out a policy is the unoccupancy conditions on the policy. A lot of insurers will restrict cover from an “all risks” basis to Fire, Lightning, Explosion, Aircraft (“FLEA”) only as soon as a property becomes untenanted. This literally means they will only pay out a claim that occurs as a result of one of these four perils.

Unless you are certain the property will not become unoccupied over the course of the year this would leave you exposed in the event of a common loss such as storm damage or flood whilst in between tenants. Clearly finding cover that has more flexibility than this is vital to protect your properties. We have access to several insurers that give full cover whilst a property is unoccupied and we regularly enhance a customer’s cover without increasing their premiums.

Another common exclusion from basic property owners’ policies is the illegal cultivation of drugs by a tenant. This is pexels-photo-930434frighteningly common in residential let properties; however, it is not exclusive to them and I have handled a claim in excess of £40,000 in the recent past for a warehouse that was converted into a cannabis farm by a tenant. Luckily for our client in this scenario they were covered on a policy which did not exclude the peril, otherwise they would have had a very unfortunate and very high bill to put right all of the damage caused to the building by the tenant’s “adaptations”.

Fires are extremely common where tenants have set up cannabis-farming operations due to the number of heaters used, the strain placed on the electrical system without adequate precaution, and the target placed on the property by local “competition”. Despite this people still often see it as an easy way to make money and we continue to see it happen. All that we can do is continue make sure our customers are insured in the event this happens to them, and recommend on risk management measures, for example three- or six-monthly inspections of residential let properties.

If you have a large portfolio of properties then it could be that you actually lose track of them all and could at some point realise you have forgotten to notify your insurer of a new house. Fortunately for you it is also entirely possible to have an extension on your policy for new purchases that have inadvertently not been notified – if this is of interest make sure that you review any quotes before agreeing to go ahead with the cheapest option.

We have access to a large number of insurers who can offer a bespoke policy to fit your requirements – and it can be done without paying over the odds.

If you would like assistance reviewing your current policy feel free to get in touch.

The PI Insurance Market

You may have heard this from your broker already, but the Professional Indemnity insurance market is hardening. Some underwriters are looking to charge higher premiums for lower levels of cover, and those that aren’t are pulling out of the PI market altogether.

There are a few reasons for this, probably the major factor being 15 years of under-performance from underwriters’ perspectives and this has been backed up by a Lloyd’s of London market review which revealed that 62% of syndicates underwriting PI business were losing money on their PI books.

However, in 2017 there were a number of more immediate triggers that sparked the change in underwriters’ attitudes, including the Grenfell Tower tragedy (bringing construction techniques into stark focus), the under-performance of waste-to-energy projects and technology, and an unusually high level of natural disasters across the globe including hurricanes and forest fires (which may not have been PI losses, but depleted cash reserves of insurers sharply).

Whereas previously an insurer may have underwritten a risk to maintain their market share, they are now looking to decline any risk which falls outside of their underwriting appetite.

This means a few things for you. It is very likely that you will see an increase in your premiums in the near future if you haven’t already. To mitigate this as far as possible it will be crucial to tackle those PI proposal forms earlier than usual. Because of the premium increases across the board more brokers are marketing their risks and as a result underwriters’ workloads are piling up, meaning it is taking longer to get quotes back from them. pexels-photo-834892

It is also important to consider that the good underwriters are more selective in the risks they accept, which means they might be able to keep a premium competitive and cover wide but they are probably going to come back and ask for more information before they can offer it. The earlier the process is started the more chance you have of getting the right underwriter to be able to fully consider your risk.

When your renewal is presented make sure you consider that insurers are introducing additional exclusions to their policies which should be made very clear to you by your broker.

Another thing it will be important to do is review your current policy limits and excesses, and keep an eye out for insurers moving away from a limit for “each and every claim” to a limit “in the aggregate” for the year, which potentially can mean in the event of a catastrophic loss your PI insurance cover is exhausted until the next renewal. This is certainly another area we would expect your broker to discuss with you when obtaining renewal terms.

There are certain things you can do to reduce your risk to an underwriter, for example active supply chain management. Ensuring that all companies within your supply chain and all sub-contractors maintain their own PI insurance to the same limit as you will make it easier for an underwriter to look at your risk favourably and can help reduce premiums. In fact, some underwriters insist on this as a policy condition.

Hopefully this guide will offer a little insight into PI insurance from the other side of the curtain to help you when reviewing your own cover, but if you would like any more information feel free to get in touch, we will be more than happy to help.

Whiplash Reform – the Civil Liability Act

The Civil Liability Act reforms, which will come into effect in April 2020, aim to tackle the endemic whiplash culture in the UK and in turn reduce the cost of motor insurance for everyone.

Specifically, the reforms will act by both reducing the compensation paid out for whiplash injuries and also reducing the amount to be paid in claimant legal fees.

Whiplash claims currently cost insurance companies £2bn a year and this is estimated to add £90 a year to the average motor insurance premium.

For any whiplash injury affecting the claimant for less than two years a tariff system will be used to give a prescribed value to the injury. At present for whiplash affecting a claimant for six months an insurer could expect to pay them around £2,000 plus full costs, however under the new tariff system the amount would be £450 plus reduced costs.background-british-budget-business-41206

With regard to legal costs the amount that claimants will be able to recover from the defendant (and their insurers) is substantially reduced. At present the “small claims track” applies for claims up to £1,000 in value and under this protocol a claimant can recover only £80 in legal costs. The limit for the “small claims track” is being increased to £5,000, meaning that most whiplash claims will now fall under the scope of this procedure. For comparison, at present for any claim worth between £1,000 and £10,000 a claimant can recover £1,300 in costs.

As with any new personal injury law many challenges to the new system are to be expected and in order to feel the full benefit of the reforms it will be vital to ensure your insurance broker fully understands them and can keep you well informed of the handling of any claims against you.

If you would like any further information on the Civil Liability Act or how we control customer claims please feel free to get in contact.

 

© 2020 Hoyland Insurance Brokers Ltd.
Authorised and regulated by the Financial Conduct Authority
Company Registration Number: 1404770
FCA Firm Reference Number: 301204