2026: Looking Ahead With Lessons Learned From Covid-19

By James Breese, Partner at Stewarts (www.stewartslaw.com)

Covid-19 decimated the hospitality sector from March 2020. The Financial Conduct Authority (FCA) estimated in 2020 that 370,000 insurance policyholders may have legitimate claims for business interruption losses resulting from the pandemic. Many of those businesses will have been hospitality businesses, given the widespread closures, restrictions on venue capacity, and reduced trading hours the sector had to contend with.

Of the 370,000 potentially affected policyholders, just 43,027 had their claims paid as of March 2023, the last time the FCA published the data. While the number of claims paid has increased, so has the original number of 370,000 policyholders.

This is due to litigation that has taken place since 2020, resulting mainly in policyholder-favourable outcomes that have expanded the scope of cover for business interruption losses, such as those suffered by hospitality due to Covid-19.

On any measure, successful claims have not been paid quickly enough. Some hospitality businesses have been lost forever because of the delay. Others have seen their business plans put back years, forced to find the resources to continue trading through the pandemic while waiting for their insurers to indemnify the business interruption losses. All this severely undermines the very purpose of a business interruption policy and its commercial utility. It is there to respond in a crisis. It is supposed to quickly inject funds into the business to enable it to continue trading. It is designed to put the business back in the position it would have been in had the crisis not occurred.

It is essential to still reflect on this for two reasons.

First, many hospitality businesses should still expect to receive some payment from their insurers for the business interruption losses that they suffered due to Covid-19. The opportunity is not lost, and it may be very welcome in the current economic climate.

Secondly, there are lessons that we can all learn from Covid-19 to enhance our ability to cope with future crises because, sadly, Covid-19 will not be the last catastrophe to have a profound effect on an entire industry.

Covid-19: the current legal landscape
There have been many court decisions in England that have broadened the scope of cover available to policyholders. Hospitality businesses that had business interruption insurance policies in place in March 2020 should therefore explore whether they can make claims under those policies.

While it may have been correct for insurers to decline such claims in 2020 and 2021, the legal landscape has demonstrably evolved.

In most cases, it will now be incorrect for insurers to continue denying the claim. Policyholders should therefore revisit previously failed claims, particularly if they have remained dormant since 2021.

Policies with certain diseases, prevention of access, or non-damage denial of access extensions may well respond to cover some of the losses suffered at the time. Those extensions could, in principle, cover the losses hospitality businesses suffered due to the various measures introduced by the government to address the Covid-19 risk. Hospitality businesses, including restaurants, pubs, and similar venues across the UK, have made considerable recoveries.

The time for pursuing those unpaid claims is running out.

Currently, legislation provides that claims may be time-barred from March 2026. The FCA has been approached by various hospitality and industry bodies to extend that deadline to ensure hospitality businesses do not lose the opportunity to recover at least some of their losses.

Lessons to learn
Many of the lessons arising from Covid-19 are for insurers and brokers to learn. They address the need for clarity in policy wording and for efficient claims handling processes.

For policyholders, including hospitality businesses, the key takeaways are:
1. Carefully consider, including with your insurance broker, the potential risks to your business and the insurance required to protect against them.

2. Carefully consider the policy wording to understand cover limitations.

3. Ensure that the insurance programme is appropriate for your business. Decisions in England have found that hospitality businesses with multiple premises or entities within a group structure may be entitled to multiple indemnity limits and sub-limits. If you are a multi-premises business, the insurance must be structured to provide adequate cover for all parts of the business.

4. Press your insurance broker when making claims to ensure they progress as quickly as possible, and seek confirmation that they are being handled appropriately by insurers.

5. Do not always presume that your insurer is correct.