Travel agents say Supreme Court’s ruling that insurers must pay out on business interruption cover for companies affected by Covid-19 is ‘some of the best news’ for the industry in months.
The highest court in the land ruled this morning in favour of small firms receiving payments from business interruption insurance policies after insurers had argued that only the most-specialist policies had cover for such unprecedented restrictions.
Abta encouraged agents who had been refused payouts relating to the first lockdown to revisit their claims, saying insurers can no longer “point-blank refuse”.
The Advantage Travel Partnership welcomed the “extraordinary” ruling, and said it could mean a “welcome relief” to cashflow for agencies with claims.
Joanne Dooey, president of the Scottish Passenger Agents’ Association said 35% of members had tried to make a claim on their business interruption insurance and, according to surveys in April and August, none had been successful.
She said the Supreme Court ruling was “some of the best news our industry has received in many, many months”.
“Travel agents paid their insurance premiums for years expecting that, when they needed it, their insurers would pay out,” said Dooey. “Instead, they found that they were, in effect, told that the most significant interruption to business ever ‘didn’t count’ as business interruption because it was ‘unprecedented’.
“We hope that the relevant insurers will now ensure smooth and swift settlement of our members’ claims.”
Looking back at how the uncertainty affected businesses at the height of the first wave of Covid, Dooey added: “As travel agents remained working during the first lock down to process the cancellations and refunds, they watched their businesses crumble.
“Many turned to their insurers to pay our on business interruption clauses in policies they had bought in good faith. Agents were looking for their claims to be settled early in the pandemic, as this would have been a lifeline for them.
“It was shocking for them to find that their insurers were abandoning them, and this brought much more uncertainty for them and for the future of their businesses.
“Travel agents, like small businesses across the UK, can now look forward to some hope that their claims will now be settled. It’s a landmark ruling for small companies who are facing financial ruin. It brings some hope for them.”
An Abta spokesperson said: “The Supreme Court judgement today brings welcome clarity for those travel businesses with business interruption insurance.
“What it means in practice is that insurers can’t point blank refuse to pay out citing the pandemic being unprecedented. Instead, it will depend on what is in the terms of the insurance.
“We encourage members who have business interruption insurance, and have had their claim denied, to speak to their insurer or broker about next steps. If the terms account for the circumstances of the pandemic, then the ruling means they should now be entitled to a pay out.”
Heather Haggis, head of financial services and insurance broking at the Advantage Travel Partnership, said: “When agents and operators needed the support it was disappointing to see a lack of recognition of how Covid-19 impacted these businesses by their insurers. Today’s judgement has been extraordinary in opening up the original responsibilities by the insurers and taking them a step further to support our members and our industry.
She noted a “broader interpretation” of the prevention of access clause, arguing that “many of Advantage’s members have been affected by partial closure and not full closure as they’ve moved their businesses online and had to stay operating to transact credit notes and refunds”.
She explained: “This caused us concerns that insurers would argue their business is still operating, albeit online or over the phone therefore not recognise the full scale impact of Covid-19 with the government ban on travel. Where we have seen insurers paying out claims, they have been reluctant to recognise the full distress of the business and they’ve been reducing the indemnity due to the policyholder to a fraction of the needed pay out.”
The Supreme Court has also taken a broader interpretation of causation, Haggis said. “This means the burden is now placed on the insurer to deny cover, rather than the insured proving there is cover and that the insurers will find it challenging to reduce the indemnity due to the insured.”
While Haggis said it was “difficult to say” how many Advantage members were affected by the ruling because individual policies vary, but noted that many agents had taken out government loans to support their businesses as uncertainty remained over whether claims would be successful. Therefore, “any support from the insurers would be a welcome relief to their cash flow”.
Advantage continues to assist members with claims.
Haggis added: “We are delighted to see the courts have recognised how businesses have been affected and appreciate how business owners and are reacting to these unprecedented times.”
But she pointed out: “This doesn’t mean there is a blanket case for insurers to pay claims, but it means where there were grey areas in the interpretation.”
If wording has explicit exclusions agents’ claims could still be unsuccessful, Haggis added. “We urge our members and the industry to read their policy wording and to speak to their broker or direct with their insurer to discuss what opportunities they have for a successful claim.”
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