Brokerbility’s chairman further notes the ‘unintended consequences of sloppy underwriting’ and ’boilerplate clauses’ contributing to brokers’ headache around navigating rejected BI claims

Broker network Brokerbility has warned that brokers should be “more careful in just declaring cover” related to business interruption (BI) claims arising in the wake of the ongoing coronavirus crisis.

Speaking during an exclusive Insurance Times webinar last week, Brokerbility’s chairman Ashwin Mistry explained that the group was adopting “more of a conciliatory position” following the onslaught of member enquiries it received since the government and ABI confirmed that the public authorities closure trigger would kick in for BI policies upon the introduction of the lockdown regime.

He told webinar participants: “We’re not declaring necessarily whether cover applies – we’re leaving that for the insurer to determine because they’ve all taken legal advice and I think the advice we’ve taken sometimes either contradicts the advice we’ve been given from insurers, who have taken advice at the highest level, and we’re a little bit circumspect as to whether we should be making declarations of cover or otherwise.

“We’re letting the insurers predominantly control communication for us and we’re in constant dialogue with the top markets to find out what their position is and I think any broker out there should be a little bit more careful in just declaring cover.”

Policy small print ambiguity

Mistry continued that Brokerbility’s stance is founded in the fact that BI claims surrounding the Covid-19 pandemic are complex, especially around policy wordings.

“Pandemics were never intended to be covered,” he said. “Where clauses are now being looked at in granular detail, that’s when cover issues have been exposed.

“I think we’ve all unearthed some sloppy underwriting, some ill-disciplined extensions and possibly boilerplate clauses which are now beginning to hurt the sector. It’s now up to the broker to read individual policies to understand the extent of exposure, or otherwise.

“The snowball has started with the class action groups that have sprung up and insurer wordings are being looked at.”

Peter Allen, co-head of financial services at webinar sponsor RSM, agreed. He said: “I don’t think it’s controversial to say that there’s obviously a degree of ambiguity here, which is regrettable.”

Referencing the FCA’s announcement earlier this month that it plans to seek a court declaration in order to clarify BI policy wordings, Allen added: “The government thinks there’s an issue here, otherwise they wouldn’t be going to court.”

Romero Insurance Group, on the other hand, has turned to barristers in order to gain clarity over BI policy small print. The firm also contradicted Brokerbility’s “conciliatory” position by supporting clients who they believe should receive a pay out from their BI insurance.

Group managing director Simon Mabb said: “We’ve spent a lot of time understanding the wordings. We’ve taken legal advice, we’ve got [a] barrister’s opinion and we’ve been working through with our claims teams to challenge some of those wordings where we believe that they are ambiguous, concentrating on those and doing a lot of communication with the clients.”

Internal conflict

However, Mabb continued to tell webinar attendees that insurers’ own staff are not all singing from the same hymn sheet when it comes to handling BI claims, which creates further difficulties for brokers trying to assist their clients.

He said: “Some of the insurers’ own staff believe that [BI claims] should be paid, and there has been definitely some ambiguity. I have seen correspondence where clients have asked for confirmation of whether there is cover applying and the insurer has confirmed – the intention is that if that premises was closed by a public authority, that [the policy] would kick in.

”But then you’ve got the claims department saying actually no it’s not covered.

“That does put you as a broker in a very difficult position if you’ve got an insurer that you go to, you go and ask the underwriter the question and at the end of the day it’s the underwriter that puts the contract together, you have the contract with the underwriter, and then suddenly the claims department are looking at it slightly differently.

“In those scenarios, there is an issue and we need to stand up – otherwise what’s our role?”

Matt Pini, head of UK wholesale at Direct Insurance Group London, added: “There’s some insurers [that are] just a little bit non-committal at the moment. I think maybe some of them are waiting to see how it pans out, maybe waiting for other insurers to take the lead.”

The next challenge

Mistry predicted that “proving the loss and/or the mitigation of claims is going to be the next big hurdle” for BI claims linked to coronavirus, partly because of restricted policy limits, but also because of the sums aggregated over the period of indemnity, which will be affected by the fluctuating lockdown rules – these have now started to be slowly eased by prime minister Boris Johnson.

He said: “Questions will be asked by insurers legitimately: what have you done to mitigate your claim? Have you taken advantage of the government relief? What have you done about being innovative about your sector? And was your premises part of a larger building that was enforced closure or was it specifically that you chose not to trade?

“There are lots and lots of questions yet to follow and claims departments are going to be very, very busy trying to interpret the definition of policies and also the application of how claims are going to be managed going forward – that is a task and a half.”