It will be nearly 10 weeks since pubs shut down and it will be another 10 before they re-open under the governments phased re-opening of the economy. The prospect of 20 weeks without income had naturally triggered many publicans to claim business interruption cover. There has been almost universal declinature to these claims by the insurance industry on the basis that the business interruption cover does not cover closure due to a pandemic and the premium paid is not commensurate with the risk involved.
In the last week we have seen leaders in the pub trade take on FBD in particular as the only home grown insurer in the High Court in an effort to pressurise the insurer to re-consider declinatures in their business interruption cover.
The office sector has been hit less severely. While offices have been closed and staff sent to work from home, tenants have still had rent demanded from them from their landlords.
And when the offices are re-occupied, it will be at something like 50% or less capacity to make it safe. So tenants will be paying 100% rent for 50% capacity. It is hard to reconcile those percentages commercially. Landlords will not be volunteering forbearance. Leases will be scrutinised by lawyers yet the Courts are not minded to re-write commercial leases.
Rent is a significant overhead for many indigenous Irish companies, making up 8-10% of the overheads, more where rents have been signed in the last 18 months or 15 years ago.
Where negotiations are unsuccessful and landlords don’t engage and Court or arbitration are not attractive, then the professional services companies that rent the offices may well consider a claim for business interruption cover under their insurance policy.
Many feel that there is little point in pursuing such claims, where they are led to believe that everyone else has been declined such cover and with insurer’s intimidating deep pockets, do businesses want to put good money after bad? That’s certainly what the insurers have factored in – that 1 in 5 will challenge the declinature of cover and then most of those will be referred to private and binding arbitration under the policy so no one will find out what the outcomes were or deals struck.
As the noose of cashflow tightens on the professional services sector, many may have to contemplate making a claim. No prejudice is caused by making a claim under the policy via the insurance broker. Prejudice is however caused if the notification of the claim is unduly delayed. So sooner rather than later. If and when it is declined and the policy provides for arbitration in the event of a dispute, then commence arbitration. Commencing arbitration is relatively straight forward and cost effective.
It is only then that the insurer will have to commit to locking up financial reserves on a worst case and best case scenario and also for defence legal costs. It is only at that stage that the insurer may contemplate reaching out on commercial terms.