The COVID-19 pandemic has disrupted all kinds of businesses all over the world, but small businesses have been hit the hardest. Many business owners pay for business insurance to help them cover the costs of doing business when they can’t do business, or to cover the costs of litigation if they get sued.
But this pandemic has put so many small businesses out of business, even if just temporarily, those insurers have been flooded with claims – and when insurers get flooded with claims, they usually look for excuses to avoid paying all those claims.
Hiscox is a major insurance company that specializes in selling business insurance to small business owners, often directly over the internet without the aid of an insurance broker. When many of those policyholders tried to file claims with Hiscox for business disruption, Hiscox allegedly claimed the pandemic is not covered under the terms of their business disruption insurance policy.
In response to the insurance company’s refusal to pay up, almost 350 policyholders came together to form the Hiscox Action Group. Mishcon de Reya, a law firm based in London, has been hired to represent Hiscox Action Group and they quickly entered into arbitration against Hiscox over the unpaid business disruption insurance claims.
Hiscox is not the only insurance company refusing to pay small business owners for the losses they have suffered as a result of COVID-19. Seven other insurance companies, along with Hiscox, are taking part in a UK court test case to determine whether insurers can be made to pay business disruption claims in the wake of COVID-19.
But the legal process is a long one, and attorneys representing Hiscox policyholders say they understand that many of their clients are small business owners who can’t afford to wait for multiple appeals and hearings to find out the status of their claim and get paid. They need their money yesterday, which is why attorneys are working as quickly as possible to come to an agreement with Hiscox.
The founders of the Hiscox Action Group are not optimistic about the outcome of the UK court test case, given the many benefits, the law affords insurance companies, as well as the ability of large insurance companies to appeal any decisions made against them, potentially dragging out the court proceedings for years. In the meantime, their policyholders could be forced to shut down their businesses for good without the funds the insurance companies promised them through their business disruption insurance policies.
Most small businesses have already been mostly, if not entirely, shut down for four months now, and although some areas have started to tentatively reopen, many of those same areas have also quickly shut down again after experiencing a resurgence in COVID-19 cases, all of which leaves the fate of small businesses very much up in the air. After four cash-strapped months, many small business owners simply can’t wait any longer for some kind of economic relief. Even if the UK court test case settles in their favor and is not appealed (and you can bet the insurance companies will appeal any decision that does not favor them), it won’t be settled until August, and even that is too late for many business insurance policyholders.
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