Posts by fortyfour

Renewed opportunity for hospitality and leisure businesses to launch another bid to claim Covid-19 Business Interruption Insurance losses

March 24th, 2022 Posted by Uncategorised 0 comments on “Renewed opportunity for hospitality and leisure businesses to launch another bid to claim Covid-19 Business Interruption Insurance losses”

The hospitality and leisure sectors were without a doubt the worst hit by Covid-19, with hotels, bars, restaurants and health clubs severely affected by the swathe of government restrictions and regulations imposed since March 2020.

Business owners were forced to navigate a plethora of changing Covid-19 rules and regulations, mandating when and where businesses were allowed to open, how services were to be provided and what measures were required to be put in place to protect the safety and wellbeing of staff and customers, whilst also seeking to remain financially viable.

This turbulent period forced many businesses to close their doors for good and countless more just about managed to stay afloat. Due to the importance of Business Interruption Insurance, it is unsurprising that many hospitality and leisure businesses continue to press their insurers for claim pay-outs, even where, upon first reading, the outcome of the FCA Test Case on Business Interruption losses does not appear to indicate there was cover.

The FCA Test Case was intended to provide answers, en-masse, to insurance coverage questions affecting thousands of businesses. Whilst the High Court and Supreme Court judgments went a long way to resolve the coverage debates, quarrels with insurers continue in relation to areas not directly covered by the Test Case, or where the outcome left uncertainties. Notably, Corbin & King, the owner of 9 upscale London restaurants including The Wolseley and the Delauney, recently issued High Court proceedings against AXA for a declaratory judgment that cover is available in respect of each of its premises up to the £250,000 limit of indemnity (a total value of £4.4m).

The question posed to the court was whether a sum insured of £250,000 applied just once to the entirety of the Corbin & King empire or applied to each entity covered by the policy? The court decided in favour of Corbin & King that each restaurant is covered for £250,000.

On 25th February 2022, The Honourable Mrs Justice Cockerill DBE held that Corbin & King Ltd and its subsidiaries were successful in their claim against AXA for Business Interruption losses suffered as a result of Covid-19.

The case considered two important matters of principle:

the scope of the Non-Damage Denial of Access ‘NDDA’ cover, following the causation analysis of the Supreme Court in the FCA test case and quantum.

  • Insurers argued there could only be cover under this clause if policyholders could demonstrate that it was an emergency by reason of Covid-19 in the vicinity, of the insured premises, as opposed to the country as a whole, which led to the actions or advice of the government.  

The judge concluded that the Supreme Court’s approach to causation should be adopted and that Covid-19 is capable of being a danger within one mile of the insured premises which, coupled with other uninsured but not excluded dangers outside, led to the regulations which caused the closure of the businesses and caused the Business Interruption loss.

  • The judge also held that the ‘NDDA’ cover provided a separate limit of £250,000 for each individual premises in respect of each claim (rather than a single limit of £250,000 in relation to all of the premises for any one claim).

This judgment is a very important step for Policyholders in their efforts to recover the losses they have suffered, and continue to suffer, as a result of Covid-19.  Policyholders with ‘NDDA’ wordings who have been previously been told by their insurers that there is no cover, should be aware, therefore, that the doors to claiming Business Interruption losses are not yet firmly shut.

Those in the hospitality and leisure sectors have been particularly hard hit, and this decision will be significant for many of them.

As far as Hamilton Leigh’s clients are concerned, only a small number of claims are potentially impacted and we are currently reviewing those claims on a case-by-case basis. It should also be noted that the judgement may yet be appealed. On 23rd March 2022, the high Court granted Axa leave to appeal the judgement, although it is unclear at this stage as to whether this will be pursued.

Regardless of the outcome, it should be noted that each policy and specific loss circumstances will be different, so each claim will be dealt with on its own merits.

A copy of the judgment can be found here.

One principal matter that remains ongoing is insurers’ treatment of “Furlough” payments, in the adjustment of Covid-19 Business Interruption claims (where coverage is established). While insurers largely agreed that government grants are to be ignored for the purposes of a Business Interruption indemnity, they have generally maintained that any support received in the form of Coronavirus Job Retention Scheme payments (Furlough), and Business Rates Relief, should either be accounted for as turnover or as a saving, thus reducing the value of the covered claim under the Policy.

Insurers are being challenged as a matter of common law, that such payments do not go to reduce the policyholders’ covered loss, and as a matter of public policy, government financial support provided to the hospitality and leisure industry and other hard-hit sectors was not introduced for the benefit of insurers.

The underlying question therefore remains: who should stand first in line to benefit from the government’s financial support measures – the hospitality and leisure industries which are still struggling to recover 2 years later, or insurers, who were largely cushioned from the effects of the pandemic?

The issue remains untested in the English courts, although a distinguished panel led by Lord Mance in the Hiscox Action Group Arbitration was reported in July 2021 to have found in favour of the policyholders on this issue.

We expect this subject to come under close scrutiny by the Commercial Court, when the issue falls for determination for the first time in the English courts in the forthcoming trial of Stonegate v MS Amlin in June 2022 and if successful, will be welcome news for many businesses that had ‘NDDA’ policy cover and who’s claim settlements were reduced by ‘furlough’ payments.

Hamilton Leigh will continue to monitor the outcome of these judgements and keep our clients abreast of all developments. Should you wish to discuss your potential Covid-19 Business Interruption claim in the meantime, please contact Jamie Foster (Head of Claims):

e: jamiefoster@hamiltonleigh.com

t: 020 8236 5368

The Importance of Two-factor Authentication

September 13th, 2021 Posted by Uncategorised 0 comments on “The Importance of Two-factor Authentication”

Cyber-security is an integral part of risk management for any organisation. Cyber-criminals are capable of executing devastating attacks that can result in financial losses, reputational damage and government fines. With those potential consequences in mind, employers should be mindful and take any precautions that might be able to protect them, such as using two-factor authentication.

Major Changes to Flood Risk in the UK

March 18th, 2021 Posted by Uncategorised 0 comments on “Major Changes to Flood Risk in the UK”

The insurance market is currently going through an extensive period of ‘hardening’. Insurers are driving higher premiums and tighter terms and conditions, with particular emphasis on flood risk. This process will affect all sectors of the economy and it is crucial that business owners understand how this is likely to impact their insurance coverage and cost.

A major contributor to the ‘hardening’ market is natural catastrophe losses, which continue to escalate around the world. The systemic effects of climate change are here. Stronger and more frequent natural disasters, for example, are destroying homes and businesses at record-breaking rates and putting entire flood systems at risk.

2020 was significant in many ways. After three relatively dry years, winter 2019/20 saw major storms causing widespread flooding across the UK. Between November 2019 and February 2020, thousands of homes and businesses were flooded in South Wales, Northern and Central England and the Scottish Borders. These storms, costing in excess of £360 million, were a timely reminder of the challenge’s insurers face from the growing threat of flooding due to climate change. Furthermore, the flooding in parts of south Yorkshire and the Midlands in November last year added an additional £110 million to insurers claims costs.

The impact of climate change will see more than 1.2 million properties in the UK ‘newly at risk’ of flooding and 1.9 million addresses ‘newly at risk’ of subsidence by 2050, leading to a potential insurance liability of £122 billion, based on data from UK Climate Predictions and a 2˚C global temperature rise.

Global warming is already having an impact on our daily lives, but the effects of it will become far more tangible and extreme in the years to come. The reality is that global temperatures are continuing to rise and flooding is becoming more common place. If expected trends continue, a large number of properties will be newly impacted, which is why insurers have completely reassessed their flood mapping data to better manage their flood exposure.

As well as flooding, climate change is also increasing the risk to buildings stemming from subsidence. The dry summer in 2018 saw massive increases in losses and insurers are bracing themselves for a repeat of those losses in 2021/22.

As climate change brings more intense storms and rising seas, Britain faces rapidly growing and shifting flood threats; something few of those at risk are yet to be aware of, potentially facing the prospect of huge insurance premium increases, restricted flood risk cover or being unable to buy flood cover at all.

Insurers are exposed as Britain fails to confront flood risk

This lack of awareness, combined with fast-increasing demand for new housing, limited available land and often disjointed policymaking and regulation mean efforts to keep people and property safe are becoming more and more strained.

About 5.2 million homes and other properties in England are at risk of flooding. Sea levels have risen about 16 cm (6 inches) in Britain since 1990, making coastal areas more vulnerable to storm surges.

Heavier rainfall is degenerating surface floods away from rivers and shorelines, in places where we never previously expected them, as rain cannot run off fast enough. The Met Office has reported that extended periods of extreme winter rainfall are now 7 times more likely than before.

Owners of flood-prone homes in Britain can buy affordable insurance through Flood Re, a government and insurance industry initiative that shares the cost of flood risk across all home insurance policies sold.

Businesses, however, do not have access to this facility and, hit by more frequent and severe flooding, are finding it harder to buy or afford flood insurance coverage, raising the prospect of them being fully exposed to flood losses themselves. It is a sad reality that several businesses have been forced to close in this last year due to them being unable to secure flood insurance cover; required to satisfy their bank/stock funders.

We have huge pressures for growth in this country and government ambition to build more homes, presents us with a real dilemma. According to the Town and Country Planning Association, which campaigns for reforms in Britain’s planning system, increasingly relaxed planning permission rules meant more properties were being built in high-risk zones.

There’s also the added dilemma for many property owners and communities not wanting to discuss climate change and flood risks, fearing it might hurt their ability to get insurance or drive away buyers and investment.

Impact to insurers from losses related to climate change

Where global average temperatures have risen in the past, incidences of climate-related weather events tended to become both more common and more severe. Insurers protect society against these risks, and these events will continue to become more expensive to cover.

The insurance industry is, of course, used to dealing with losses from physical risks. For example, recent research suggests that the frequency of climatic natural disasters has grown as much as threefold since 1980. Despite such an increase, the industry has managed to demonstrate resilience and innovation in diversifying the risk. However, there is now concern whether further deterioration of extreme climatic events might result in an increase in the protection gap.

The first quarter of 2021 has seen many homes and businesses not previously situated in traditional flood risk areas, now affected by insurers’ reassessed flood mapping. This has had a significant impact on their insurance premiums and policy coverage. Hamilton Leigh has designed a Business Flood Plan template, available to all of our clients, in addition to a Flood Toolkit to help our clients proactively manage their flood risk exposure.

Invest in flood risk management

Business owners need to be investing in proactive flood risk management to provide practical and manageable solutions for underwriters to insure them against flood. To position yourself to do this as best as possible, working with knowledgeable partners is a must. Aligning with Hamilton Leigh to provide a united stance on presenting your requirements to insurers in the best and most accurate light is paramount for securing flood risk cover, where many businesses will struggle.

An increased frequency and severity of major weather events means a higher number of more costly claims for insurers to deal with, globally as well as in the UK.

To reduce exposure and resultant interruption to your business, it’s imperative that business owners recognise the need to improve their flood resilience, before the storm clouds gather, not after. 

What Hamilton Leigh can do to help you

  • Design a comprehensive and robust Business Flood Plan
  • Ensure your Business Flood Plan strategy is communicated throughout the business
  • Communicate your Business Flood Plan with your insurers to demonstrate your proactivity
  • Help you sign up for advance flood warning alerts in your area
  • Create Flood Toolkit templates
  • Guidance for the preparation of your property for flooding
  • Agree a risk retention strategy that accurately reflects the business’s risk tolerance appetite
  • Reassess loss prevention practices

The Environment Agency estimates that with proper flood preparation, most businesses can save up to 90% on the cost of lost stock due to flooding, with a proper Business Flood Plan.

It is now more important than ever to work proactively with Hamilton Leigh to ensure your interests remain fully protected.

For further information and to receive a copy of our Business Flood Preparation Checklist and Flood Toolkit, please contact your Hamilton Leigh client service executive or email floodrisksupport@hamiltonleigh.com.

Motor dealers must plan ahead to prevent being hit with higher premiums and left without flood cover

February 22nd, 2021 Posted by Uncategorised 0 comments on “Motor dealers must plan ahead to prevent being hit with higher premiums and left without flood cover”

The insurance market is currently going through an extensive period of ‘hardening’. Insurers are driving higher premiums and tighter terms and conditions, with particular emphasis on flood risk. As there are only seven specialist motor trade insurers operating in the open market, this process will affect all motor dealers. It is crucial that business owners understand how this is likely to impact their insurance coverage and cost.

Drivers of the hardening market 

The insurance hardening market cycle is being exacerbated by falling investment returns, changing legislation, as well as the onslaught of risks associated with the coronavirus pandemic and climate change. Insurers experienced higher claims across almost all product lines in 2020.

Global commercial insurance pricing increased by 20% in the third quarter of 2020; the largest quarterly increase in more than eight years as insurers attempt to reduce their risk exposure and reverse the squeeze on profitability.

A major contributor to the ‘hardening’ market is natural catastrophe losses, which continue to escalate around the world. The systemic effects of climate change are here. Stronger and more frequent natural disasters are destroying homes and businesses at record-breaking rates and putting entire flood systems at risk.

Between November 2019 and February 2020, thousands of homes and businesses were flooded in South Wales, Northern and Central England and the Scottish Borders. These storms, costing in excess of £360 million, were a timely reminder of the challenge’s insurers face from the growing threat of flooding due to climate change. Furthermore, the flooding in parts of south Yorkshire and the Midlands in November last year added an additional £110 million to insurers claims costs.

As climate change brings more intense storms and rising seas, Britain faces rapidly growing and shifting flood threats; something few of those at risk are yet to be aware of, potentially facing the prospect of huge insurance premium increases, restricted flood risk cover or being unable to buy flood cover at all.

Our businesses are exposed as Britain fails to confront flood risk

About 5.2 million homes and other properties in England are at risk of flooding. Sea levels have risen about 16 cm (6 inches) in Britain since 1990, making coastal areas more vulnerable to storm surges. The Met Office has reported that extended periods of extreme winter rainfall are now seven times more likely than before.

Businesses, hit by more frequent and severe flooding, are finding it harder to buy or afford flood insurance coverage, raising the prospect of them being fully exposed to flood losses themselves. It is a sad reality that several motor dealers faced closure in this last year due to being unable to secure flood insurance cover; required by their bank/vehicle stock funders.  

Invest in flood risk management

Motor dealers need to be investing in proactive flood risk management to provide practical and manageable solutions for underwriters to insure them. Knowledge of insurers’ flood risk strategy is paramount. Insurers’ will focus on external exposures, such as compounds, forecourts and the proximity to watercourses. They will also have to comply with strict accumulation limits within certain areas. Basically, if your insurer has reached their accumulation limit in your area, they will be unable to provide cover.

Insurers’ will need to understand what risk assessments motor dealers have completed in respect of flood exposures? Is there a robust business flood plan in place? Have you signed up for flood alerts? Do you have a contingent plan, should you need to move vehicles quickly?

Most vehicles will have low seals. Water only needs to reach around 30cm deep for these to be penetrated. Once a seal is broken, the vehicle is likely to be written off. There is also the need to consider the enhanced technology and complex electrics within vehicles; again, if water enters the electrics then the vehicle is likely to be written off.

These factors explain why vehicle water damage claims are getting more expensive and likely to get worse too, with the move to electric and hybrid vehicles.  

Working with knowledgeable partners is a must. Aligning with an experienced, proactive insurance broker to provide a united stance on presenting your flood exposure to insurers in the best and most positive light is crucial for securing flood risk cover.

To reduce exposure and resultant interruption to your business, it’s imperative that motor dealers recognise the need to improve their flood resilience, before the storm clouds gather, not after. 

What your broker should be doing for you now

There are numerous practices, such as designing Business Flood Plans, helping you sign up for flood alerts, create Flood Toolkit templates and guidance for the preparation of your property for flooding. Click Here for Hamilton Leigh’s – Major Changes to Flood Risk in the UK bulletin.

The Environment Agency estimates that with proper flood preparation, most businesses can save up to 90% on the cost of lost stock from flooding, with a proper Business Flood Plan.

Your approach to your insurance renewal can also make a difference. Start your renewal process early; insurers are becoming more selective about the risks they choose to write. Agree your renewal strategy with your broker; devise a plan to reflect your risk tolerance appetite. Be prepared to provide additional information as insurers now require more detailed underwriting information to demonstrate your risk management controls.

Hamilton Leigh has designed a Business Flood Plan template, available to all motor dealers, in addition to a Flood Toolkit to help proactively manage your flood risk exposure.

For further information and to receive a copy of Hamilton Leigh’s Business Flood Preparation Checklist and Flood Toolkit, please contact Lee Cohen on 07980 606886 or email floodrisksupport@hamiltonleigh.com.

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