Struggling with business interruption insurance? This may be the solution you’re looking for

Recently we wrote about Business Interruption Insurance and the FCA test cases that are currently being pursued. It is hoped that these cases will provide the answer for many policy holders and/or provide persuasive argument to assist policy holders with their interruption claims arising from Covid-19.

Did you obtain insurance directly or through an insurance broker?

If, like many businesses, you used and paid for a third party insurance broker to assist you with your insurance requirements there may be a professional negligence claim to investigate.

An insurance broker is a professional and therefore, just like a solicitor or an accountant or other professional, should adhere to and meet certain standards (those which a competent member of the profession would provide).

If you feel that your broker has not met that standard then there could be a potential claim.

What do I need to show?

In order to bring a claim successfully it will be necessary to show that the broker owed you a duty of care, that the broker failed to fulfil that duty by acting without the appropriate level of skill or care a reasonably competent professional person expert in the insurance business should display and; a loss has been caused by /as a direct result of that failure .

The normal broker/client contractual relationship should, in most cases, be sufficient to demonstrate that a duty of care existed.

The next issue to be demonstrated is whether the broker breached that duty of care.

As cover being declined or reduced is not, by itself, conclusive of negligence (breaching the duty of care) a careful assessment of the actions taken by and instructions given to the broker will need to take place initially.

For example, it may be that the broker failed to properly investigate your businesses full insurance requirements/to elicit details which you may not have realised were material, to arrange cover which met your instructed needs or, to advise you of the important qualification conditions and the requirement to make full disclosure which risks affecting your claims or rights in the future and that included those relating to Business Interruption Insurance.

Since August 2016, there is also the duty of fair presentation introduced by Insurance Act 2015 which means that a broker has a bigger role to play in helping clients to understand what must be disclosed to insurers and to provide information in a clear and accessible manner.

In the event that a failure to comply with the duty of care can be demonstrated, the next step is to look at the nature and extent of the loss that was caused by those breaches and which are reasonably foreseeable losses which would be caused by those failures in the circumstances.

The decision in Dalamd Ltd v Butterworth Spengler [2018] clarified and tightened the appropriate test for causation in brokers’ negligence cases as well as emphasising the importance of the client’s role in the insurance procurement process. These issues will, when assessing the case, need careful consideration.

How do you present a claim against an insurance broker?

Once a full assessment is complete and if a claim is to be presented, the procedures set out in the Professional Negligence Pre-Action Protocol need to be followed.

This starts with presenting the broker with a letter before claim and providing the broker with a set period of time to provide its letter of response indicating whether they intend to defend the claim or not and if so, on what basis. Thereafter, where possible, steps should be taken to try and resolve the matter between the parties whether by negotiation or mediation for example. Where a resolution is not possible, a formal Court claim is formulated and presented to Court for issue.

For further information on the Protocol please see my colleague, Nicola Radcliffe’s blog on the subject .

How long do I have to make a claim?

Generally, it is 6 years from the negligent act or the breach of contract occurring but other factors can need to be considered.

What can I recover is my claim worth?

If your insurance broker has acted negligently and caused you to suffer a loss, the sums you can recover are designed to put you back into the position you would have been in if your broker had not been negligent or had the contract been fulfilled.

Your losses would normally be covered by your broker’s professional indemnity insurance policy.

If you have a business insurance policy that didn’t pay out when you needed it to and you think that your insurance broker may be at fault, our professional negligence team can help.