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Insurance companies cough up pandemic pay

After a dash through the courts, insurance companies will have to pay out for pandemic insurance but this may be too late for some.

21st Jan 2021
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A picture of a 'temporary closed' sign

Accountants have had something of an ordeal over the last few years. Sometimes, it feels as though our profession has been under constant fire from the media for behaviour that has not found favour.

To be fair, some firms seem unable to carry out audits to an adequate standard, while others play fast and loose with tax legislation in ways that can look embarrassing when put under the spotlight.

However, when compared to the activities of those in other professions (one hesitates to suggest the law, estate agency or those that work day in and out of the Houses of Parliament), perhaps we are getting an unjustifiably rough ride.

There is also some irony in the fact that those making the attacks tend to be members of the fourth estate and given their willingness to tap phones and take photos of famous people trying to enjoy a little privacy, accusations of hypocrisy should be the order of the day.

Having said all of that, this columnist has been outraged for something like nine months by the behaviour of those in another industry who were clearly caught bang to rights and tried to use the law courts to slime their way out of paying an estimated £1.2 billion.

Insurance companies have long had a reputation for attempting to deny valid claims with little or no justification. You can understand their position to a degree, when you read about attempted frauds against those in the industry, for example in connection with car accidents that never happened or were very minor.

Even so, if somebody takes out a policy of insurance to protect their organisation against business interruption and that business is then interrupted, the policy holder’s natural reaction is that the insurance company should put on a brave face and pay out the covered amount without complaint.

We must all fully accept that if the policy specifically excludes pandemics then it will not apply in the case of a pandemic. When the policy is silent on the matter, that might be a matter for the lawyers. In a situation where the policy specifically refers to pandemics or contains “disease, denial of access to business premises and hybrid clauses” then it is outrageous that big multinational insurance providers should deny the insured’s rights.

It is therefore very pleasing to see that the Supreme Court has come to the same conclusion, albeit only after a long period of wrangling, which may well have proved fatal for some of the businesses that were initially cheated out of their entitlement.

That is the really sad part of this story. One imagines that many of those involved will receive pay-outs approximately one year after the event and, given that interest rates are close to zero, they will either have lost little or might receive adequate compensation for the delay.

Regrettably, many businesses that desperately needed cash funding are likely to have gone under as a direct consequence of being denied the insurance for which they had innocently paid their premiums under the presumption that they would be paid in a timely manner.

It is distinctly possible that some readers might have faced problems of this type in their own businesses or have clients who have failed because their insurance companies did not play the game.

Even if businesses have managed to survive, they may have made staff redundant as a direct consequence, which is damaging to business, the employees and the economy.

Taking this a stage further, many may have guaranteed business loans against their homes and been forced to sell up, quite possibly in a hurry and at a diminished value.

Assuming that there are a large number of cases of this type, it will be fascinating to see whether any enterprising solicitors are willing to form an action group to take cases suing insurance companies for consequential losses.

Realistically, while the insurers might claim to be unhappy, we all know who will pay for this in the long run - the poor old clients that take out insurance policies in future, ie you and me.

The moral of this story is that it is generally a bad idea to try and cheat your clients. I would hope that no accountant would ever behave in this fashion and therefore, for once, we can look like knights in shining armour when compared to some of the folk currently operating in the insurance industry.

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By memyself-eye
22nd Jan 2021 18:13

My son's business - festival catering- has £20k loss of income insurance (he thoght it would cover him for the loss of ONE event). He has just put in a claim following the court case. Not a lot of cover, but just might be enough to restock for Glasto this year

Err, well maybe not Glasto!

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