Insurance battle over UK Covid lockdown continues in courts


Four years after COVID-19 lockdown restrictions forced Burgers & Lobster to close its restaurants, the company that supplies the delicious patties and crustacean rolls is still settling with its insurance company to recoup some of the losses it suffered as a result. Is struggling.

Along with more than 20 other businesses, including the owners of Hawksmoor Steakhouse and Newcastle Falcons Rugby Club, the chain has filed a claim against Allianz at the High Court in London after the insurer refused to pay out on its business interruption policy, demanding compensation. A type of cover designed to make up for lost revenue.

The case is one of dozens being fought between insurers and UK policyholders ranging from national hotel chains to local hairdressers, breweries and tattoo parlors who are angry at how their claims have been handled Is.

Data from litigation analysis group Solomonic shows there are more than 100 unresolved insurance cases related to Covid-19 in the High Court. According to Solomonic, the total combined value of the amounts sought is approximately £735 million.

A burger and lobster restaurant in downtown London
A burger and lobster restaurant in the City of London. The chain is one of a number of companies bringing a claim against insurer Allianz in the High Court © Charlie Bibby/FT

The dispute is ongoing three years after the Supreme Court's landmark ruling in favor of thousands of other businesses and more than a year after the World Health Organization declared the COVID-19 emergency.

While the “test case” – brought by the regulator, the Financial Conduct Authority, on behalf of policyholders – concerned only particular types of policy wordings, at the time the decision was expected to speed up the payment of claims more widely.

This prompted the FCA to call on insurance chief executives to deal with outstanding disputes in the “cheapest and quickest way possible”.

That simply hasn't happened, at least in the case of Burgers & Lobster, said Olivier Mougin, chief financial officer of the restaurant chain, which is seeking about £4.5 million from Allianz.

He said protecting customers in such circumstances should be the “core” of insurers' business. Instead, Allianz adopted “the approach of protecting its own business first”.

Lee Watts, director of technical claims at Allianz's UK commercial business, said the insurer understood the frustrations of businesses dealing with the impact of Covid. But he also said he was “confident that we have implemented the cover correctly and in line with previous legal precedents, including the Supreme Court decision in the FCA test case”.

Allianz is not alone in fighting such a legal battle. Many of the world's largest insurers, including Aviva, AXA, QBE and Zurich, are also parties to live Covid-related cases, according to Solomonic Data.

A Hawksmoor restaurant in Spitalfields, London
A Hawksmoor restaurant in Spitalfields, London © Charlie Bibby/FT

A large category of continuing disputes relate to claims under the “denial of access” clause such as Burgers and Lobster. In these cases, the insurance was triggered if access to the premises was disrupted.

Such terms were originally devised to protect against more traditional risks such as bomb threats. Insurers have argued that they do not apply to pandemics.

While the Allianz policy specifies that it will cover losses if access is denied by a “policing authority”, the insurer argued that it does not apply if the central government imposes a Covid lockdown.

The second category of dispute concerns “on the premises” policy wordings, which cover businesses for an outbreak of disease in their establishment.

A man wearing a face mask walks into a PizzaExpress restaurant in London at the height of the pandemic
PizzaExpress scored a legal victory last year when the High Court ruled that Covid losses should be included in its insurance cover © Daniel Leal/AFP via Getty Images

Policyholders including PizzaExpress and London's Excel Event Center won victories in the High Court last year as the court ruled that their “on the premises” policies should cover Covid losses. The insurers appealed and the appeals court is due to hear the case next month, although two insurers, CNA and RSA, have settled.

Roger Franklin, head of insurance litigation at law firm Edwin Coe, said that while insurers were under the FCA's guidance not to “litigate everything to the nth degree”, many were taking “every point under the sun” to court. Were staying.

The Association of British Insurers trade body declined to comment, although lawyers working for insurers dispute Franklin's characterization.

A leading insurance barrister said insurers are making “perfectly respectable” arguments in rejecting claims, even if they ultimately lose in court.

“Insurance companies probably have a duty to their members and shareholders to contest liability if it is appropriate to do so,” the barrister said.

The FCA said in a statement: “We expect companies to treat customers fairly and handle any outstanding business interruption claims promptly.”

Insurers paid out £1.7 billion on pandemic-related claims in the year to March last year, according to the latest regulatory data.

Richard Leedham, partner at law firm Mishcon de Reya, said that although this “sounds like a lot, it really isn't when you look at the size of the damage caused”.

However, not all decisions have gone against insurers. The High Court ruled in Allianz's favor on the “policing authority” point in a related case in January – a blow to Burgers & Lobster's claim, which had similar wording. That decision is being appealed by the claimants in that case.

Other companies battling Allianz with Burgers & Lobster include leisure company Open House, whose London venues include The Lighterman in King's Cross and The Broadcaster in White City.

Lighterman in Kings Cross
Lighterman in King's Cross. Owners of pub chain, Open House, are also fighting insurer Allianz © Alamy Stock Photo

Co-founder Ankur Wishart compared the insurer's approach to the “strong support” shown by landlords and banks. Insurers were “debating the definition of a term” despite “common sense saying this.” [the policy] “Answer must be given”, he said.

He said the legal wrangling over insurance was one of several recent disappointments for the hospitality industry, along with rising electricity prices, a transport sector strike and Brexit.

“For us, at least we are recovering. We see light at the end of the tunnel,” Wishart said. A court victory “would be great, but we're not really counting on it”.

Others have not been so lucky. Policyholder lawyers said many customers have gone bankrupt while waiting for claims to be paid.

“A lot of them have gone under in the last three or four years partly because they didn't get their insurance money,” Leedham said. “Survivors will be damned if they let the insurers get away with it,” he said.

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