FCA Seeks To Resolve Business Interruption Insurance Issues, With 56% Of Pub Applications Made Rejected

British Beer & Pub Association says move by financial regulator should help pubs

The British Beer & Pub Association, the leading trade association representing brewers and pubs, has today welcomed an announcement by the FCA that it intends to obtain a court declaration to resolve contractual uncertainty in business interruption (BI) insurance cover.

There have been widespread concerns amongst businesses, and especially pubs, about the lack of clarity and certainty on Business Interruption insurance claims.

Research by the British Beer & Pub Association amongst its members found that there has been very little success when they have tried to claim on their insurance policies.

Of the member companies surveyed that have claimed through either their Business Interruption cover or through their pandemic cover, there have been no pay outs thus far.

56% of those applications made through Business Interruption cover have been rejected, whilst 44% await an outcome.

For pandemic cover, 67% of applications have been rejected, with 33% awaiting an outcome.

Separate research from the British Institute of Innkeepers revealed earlier this week found that just 3% of pub businesses had been successful in receiving a Business Interruption insurance claim. The BBPA is not aware of any successful claims for Business Interruption insurance amongst its members yet.

The intervention from the FCA to increase certainty for pubs making Business Interruption claims is most welcome by the BBPA.

Emma McClarkin, Chief Executive of the British Beer & Pub Association, said:

“There has been a severe lack of clarity for pubs on Business Interruption insurance claims. This had added to the terrible uncertainty our sector faces in what is already a very precarious situation.

“It is simply not right that 56% of pub Business Interruption claims have been rejected, whilst 44% still await an outcome.

“We hope the FCA announcement today will help resolve some of the uncertainty our sector faces on its insurance cover.”

The consortium of hospitality experts and associations which launched a crowdfunding campaign to support those who had been refused help with their business interruption insurance policies, has welcomed the announcement by the FCA which intends to seek legal clarity so resolving doubt for businesses who are facing uncertainty on their claims.

Headed by Rob Atkinson, an in-house lawyer for Black and White Hospitality which operates the Marco Pierre White group of franchised restaurants and manages a portfolio of hotels across the UK, the campaign has been set up specifically for the hospitality sector so that pressure can be applied on insurers refusing to pay out.

While many operators thought that they were covered having taken out, in good faith, insurance that would provide them with some form of income in the event of an interruption to business, many were shocked to be told that they weren’t covered by the current crisis.

With backing already from UK Hospitality, Best Western Hotels, the Vine Hotel Group plus a host of smaller independent operators, news on the FCA’s stance is has been broadly welcomed.

Kate Nicholls, UKHospitality Chief Executive said: “We need much more clarity on the insurance issue, so this action by the FCA is very welcome. Businesses have taken out policies in good faith and many are now perplexed as to why they are not being honoured. The FCA has rightly said that, in some cases, declining to pay will be the correct decision, but in others they must be settled. The lack of transparency and confusion for businesses is adding an extra layer of disturbance at what is already a very difficult time.”

Atkinson added: “This is very good news for all those across the hospitality sector. To have a body like the FCA add its weight behind the business interruption issue will hopefully ensure those who have taken out policies in good faith to cover themselves in a time of crisis get a resolution soon.

“But we still need to be ready to launch legal action if required. FCA intervention may add clarity but they have been clear that it is not intended to encompass all disputes. We must maintain the pressure from all angles and our crowdfund campaign does just that. ”

The crowdfunding campaign aims to raise enough money to initiate a three-phase plan to support hospitality businesses who have had claims rejected.

Phase one: a review of policies and insurers’ reasons for declining claims, followed by the preparation of advice on coverage under each category of policy.

Phase two: a focus on pre-action representation with formal letters being sent to insurers setting out the position on coverage. Their responses will then be reviewed and reported with settlement, in principle, being attempted.

If phase two fails to bring immediate results, phase three will be implemented in the form of litigation.