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Agents are being left frustrated by insurance companies refusing to pay out on business disruption policies, despite a Supreme Court judgment on the issue five months ago.
The UK’s Supreme Court ruled in January that small firms should receive payments on their policies for disruption and losses caused by the first Covid-19 lockdown in spring 2020.
But the ruling from this test case only covers certain types of wording within policies, meaning many insurance companies are turning down business interruption claims from travel agencies.
Several agents are now taking their insurance companies to the Financial Ombudsman Service in a bid to secure payments, with arguments about what the wording in their policies means and whether they are covered for Covid-related shop closures.
Jill Waite, from Pole Travel, said the agency’s claim had been rejected by the insurance company because Covid “would have to have been in my premises”.
“We sent the clause to Abta’s legal department, and they said they think we are covered,” she told TTG. “But the wording is open to interpretation. We’ve been arguing the case since April 2020.
“One of our staff was unwell during that time who might have had Covid but they couldn’t get a test then [in March 2020], so how can you prove whether they had Covid if there was no testing?”
Paul Brewer, director at Imp Travel, said the agency’s claim had also been rejected for a similar reason by their insurer and they had taken the case to the ombudsman.
“We got an English language specialist to look at the wording of the clause, and their conclusion was that it was anomalous,” added Brewer, who is making a claim for £50,000.
He added that this analysis of the policy wording was now being used in Imp Travel’s case to the ombudsman.
The slow or non-payment of business interruption insurance to certain companies could also lead to action against insurers, which is currently being prepared by law firm Provenio Litigation.
Mark Goodwin, Provenio’s managing partner, said: “Despite the Supreme Court ruling and public assurances to the contrary, potentially legitimate claims in the travel and tourism sector are still being rejected, delayed or not met by insurers.
“If insurers continue in the same vein, it is likely that legal proceedings will be necessary to hold them to account.”
The FCA said insurers have already paid more than £700 million to claimants for business interruption since the test case verdict.
“It is critical that the momentum of the business interruption test case and the Supreme Court judgment is maintained, and that all businesses with valid BI (business interruption) claims receive interim payments or final settlements due to them as soon as possible,” said a spokesperson.
But many agents will not benefit directly from the test case verdict, which mostly affects the UK hospitality industry, including pubs, bars and restaurants.
The Travel Network Group (TTNG) said the majority of policies held by its members included the “disease manifesting itself at the premises” clause, which was not covered by the Supreme Court judgment.
“A small number of members had policies with wording included in the judgment and submitted claims with the insurance companies,” added a TTNG spokesperson.
“Some of them are still waiting for a response, as they had to submit a lot of information to the loss adjusters from the insurance companies, who were assessing the claims.”
A spokesperson for Advantage Travel Partnership added: “Due to the scale of membership, our members are each in a slightly different position, as they have different policies, but Advantage is continuing to support them with information as and when we can.”
Abta said its legal department was advising members who have seen their claims turned down. “The legal team has also assisted members whose insurers have accepted liability for business interruption insurance cover, and who are seeking to challenge the basis and calculation of their claim,” added a spokesperson.
It came as the government heard calls in parliament for sector-specific support for agents after an Abta petition was signed by almost 105,000 people.
MPs requested an extension of the self-employment income support scheme, full business rates relief and urged testing rules be relaxed. However, health minister Jo Churchill claimed the Treasury was already supporting agents.
Abta chief executive Mark Tanzer will appear before parliament’s Treasury committee next week to make the case for the trade, and set out how government support for travel has fallen short of that afforded to other sectors.
Travel agent campaign group Target, which now has more than 1,000 members, has called on all agents to let the group know their struggles accessing government financial support during the pandemic, which Target plans to pass on anonymously to Abta and Tanzer ahead of his appearance before the committee.
MPs will convene again on Thursday 10 June to further discuss the financial implications of the pandemic on travel, with both Abta and Target urging members to contact their local MPs and tell them their stories of hardship in the hope of shining a light on the issue in Westminster.
For more in this issue, see TTG’s piece with Goodman Derrick LLP solicitor Jonathan Cole on the five things to consider when making a business interruption insurance policy claim.
Getting these insurance claims paid will mean the difference between closing and being able to continue for many travel agents.
When the first court cases played out, the hospitality industry got together and appointed a barrister to represent them in court – that is why so many from that sector have been able to successfully claim.
The travel industry bodies did not get to grips with the issue or the importance of this to their members and adopted a “wait and see” response. Even now, we have some consortia assisting members while others are not.
There are some no-win, no-fee legal sharks around, charging 10-25% fees, but there are so many cases that they will only take the rock-solid ones, not claims that aren’t 100% clear.
We need all of the travel bodies to work together with the Financial Conduct Authority to support their members.
In our case, the claim we lodged was refused, and we have used the Financial Ombudsman Service as an arbitrator against both the insurer and the broker who wrote to us at the time the policy was taken out, stating “business interruption insurance is covered as standard in this policy”.
However, we have had to do this on our own without support from the trade bodies. We still await an outcome. I would appeal to all of the trade bodies to finally work together for their members on these claims.
Graeme Brett is a director of Westoe Travel in South Shields
As we understand it, very few travel businesses have actually received payment on a business interruption insurance claim as yet. While insurance firms aren’t in the habit of paying out liberally, many of us believed this avenue would offer some relief for our ravaged industry. Instead, we see yet more doors closing on small travel firms. We can only hope the ombudsmen and others will eventually change this story.
