‘Being left out to dry’ as insurers deny Covid-19 claims

The Galway chef and restaurant owner said the hospitality sector is being “left out to dry” by the insurance sector.

“I inquired whether I would be covered, but my claim was rejected. It’s very frustrating. It’s supposed to be insurance against closure, but when we close, we get nothing,” he said.

Publicans and restaurant owners across the country have vented their frustration at the insurance industry’s handling of business interruption claims during the Covid-19 shutdown.

Many businesses were hoping that they could use their insurance to pay their staff and cover their loss in earnings, as well as easing the burden on the public coffers by not having to rely on the pandemic unemployment payment or the temporary wage subsidy scheme.

However, the insurance companies have said that most business interruption insurance policies do not provide cover for a global pandemic, so they cannot payout.

Officials from the Department of Finance held discussions with Insurance Ireland and most of the key insurers in the Irish market have agreed to reduce premiums for business customers to reflect the reduced level of exposure with many business premises now shut.

However, in relation to claims, Sinn Féin’s finance spokesperson Pearse Doherty criticised the insurance industry for the stance they have taken. He said he has been contacted by hundreds of firms and SMEs throughout the country, and that it is clear that insurance companies are “refusing to accept indemnity.”

“Firstly, the policies held by businesses are not all the same. While some business policies are not covered for business interruption and some are, explicitly in the case of infectious disease, others are more ambiguous.

“For those who are covered for business interruptions, their insurers are refusing to accept indemnity for a number of reasons.”

Mr Doherty says the reasons provided to businesses who have contacted him are: “while the policy covered business interruption, you voluntarily closed your business; while the policy covered business interruption in the event of infectious disease on your premises, Covid-19 was not specified among the diseases covered; and while the policy covered business interruption in the event of infectious disease on your premises, a case of Covid-19 was not reported on your premises.”

“This is not only deeply cynical but implies that the only way businesses can access cover is by remaining open until a customer or worker contracts Covid-19. Thankfully, businesses that have closed have a greater regard for public health than insurers do for their customers.”

Mr Doherty also added that he does not believe the insurance industry is following the Central Bank's advice, which was to rule in the claimants’ favour if there was ambiguity in the scope of cover.

“This is part of the problem... it isn’t enough for the Bank to publish advice without it being enforced. It is our view that a significant sample of cases should now be audited and then published. This will require clarity that insurers must payout where there is cover for business interruption or even ambiguity. And it would pressure insurers to do the right thing.”

JP McMahon’s insurance policy read: “Insurance is extended to include loss as insured in consequence of closure or restrictions placed on the Premises on the advice or with the approval of the Medical Officer of Health of the Public Authority as a result of a notifiable human disease manifesting itself at the Premises.”

His insurers advised that this extension does not provide cover for “self-decision to close” or “general Government instruction to an industry to close”.

Mc McMahon says that the situation is particularly frustrating because he believes the insurance companies are happy to pay out false injury claims without contesting them.

“Is the whole point of having insurance just so they [insurance companies] can give a pay out to people who ‘fall’ on our premises? Our premiums go up every year. I don’t think the insurance companies will pay [business interruption insurance] unless the Government demands it.”

Both the Vintner’s Federation of Ireland (VFI) and the Restaurant Association of Ireland (RAI) have criticised the insurance industry, saying that claims were being rejected on the basis that the premises were closed “voluntarily”, or that because the virus did not originate on the premises, cover would not be provided.

The VFI, who represent publicans in Ireland, said that they were in an ongoing dialogue with the Department of Finance about the “insurance sector’s refusal to accept claims arising from the Covid-19 crisis.”

“We need to be very clear that pubs were told to shut by the Government on March 15,” said Padraig Cribben, VFI chief executive.

“This was a directive issued by the National Public Health Emergency Team through the Department of Health, so the insurance sector’s claim this was a ‘voluntary’ shutdown is incorrect.

“The VFI expects the insurance sector to honour member policies that contain provision for issues such as business interruption.

“If the insurers refuse to process legitimate claims we would expect to see some members taking legal action.”

The VFI also said they received confirmation from Allianz and FBD that they will not be providing business interruption cover for the pandemic.

The Restaurant Association of Ireland said they have not made any progress with lobbying the government and the insurance industry in relation to business interruption insurance.

“It seems to me that the Government is running away from the issue, instead of taking it on full tilt,” says Adrian Cummins, CEO of the RAI.

“Very simply, we want the insurance industry to payout across the board to all businesses who are suffering from business interruption due to Covid-19. That’s why insurance premiums were paid.”

However, the insurance industry has argued that most business interruption insurance policies do not provide cover for a global pandemic such as Covid-19.

Insurance Ireland, which represents the insurance industry, did not respond to a request for comment.

Zurich stated that “as most of our policies are specific to individual customer needs, we treat every claim on a case by case basis”.

In a statement, Aviva said: “Business interruption cover is generally not intended to provide cover for a global pandemic such as Covid-19 and the scale of the Government support and interventions we have seen in recent days demonstrates the widespread impact on all aspects of the Irish economy.

“Only a very small minority of businesses have chosen to buy any form of cover that includes local closure due to an infectious disease. As a result, the majority of standard business insurance policies, including those offered by Aviva, do not provide cover beyond physical damage to a premises that renders the business unable to continue trading.

“We cannot pay claims for risks that have not been priced or covered in our policies. However, we are very mindful of our commitments to the customer and will adjudicate each claim fairly and consistently in line with the policy terms and conditions.”

Allianz did not respond to specific questions about business interruption insurance but did outline how they have extended their cover so all supermarket, newsagent, restaurant and café policies will include cover for takeaway services.

AIG and FBD declined to comment.