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The Hiscox Action Group, which represents small companies whose business interruption claims have been rejected by Hiscox, said in the past two weeks the value of the claim has grown from £40m and from 400 to now more than 600 policyholders. It expects even more businesses to join the arbitration action in the coming weeks.
They said the total claim would likely exceed £52m as they would be seeking additional compensation under the Enterprise Act 2016, which affords policyholders damages if an insurer is found to have unreasonably delayed paying claims. ‘We are hearing that Hiscox Action Group members are going out of business every day’, said Daniel Duckett, one of the organisers of the group action and the owner of a cake shop in Belfast. ‘It is a scandal that Hiscox has not honoured its obligations and paid out on policies that clearly should have been triggered.’
The group said it would not be impeded in pursuing its claim by a High Court test case organised by the Financial Conduct Authority (FCA), which will be heard in late July 2020.
The FCA said it will take a sample of policy wordings it feels are the most representative to court, in order to secure a legally binding ruling. Out of 17 wordings to be ruled on in court, three of them are from Hiscox.
Mishcon de Reya LLP (Mishcon), which is acting for the Hiscox Action Group, said it intends to launch an ‘expedited arbitration claim’ against the insurer. Arbitration hearings are normally confidential, so insurers may be more amenable to settlements reached through arbitration.
Policyholders met with the FCA to express concern that the FCA test case could be protracted, if the findings were appealed by insurers, or the case went to the Supreme Court.
A spokesperson for Hiscox confirmed the insurer had received a letter from the policyholders. ‘We shall carefully consider it and respond accordingly’, the spokesperson said.
Hiscox said previously its policies were not intended to cover pandemics. Hiscox has told investors that ‘notwithstanding’ its current position that policies would not pay out, if it was found liable, it had potential exposures of between £10m to £250m solely from claims for interrupted business, which is in addition to the US$175m it says it could pay out from event cancellation and travel claims.
On 6 June 2020, Mishcon said it has secured litigation funding for a group action against QBE after it rejected claims for business interruption made by dental practices forced to close because of the government-ordered coronavirus lockdown.
Mishcon said the insurer’s dental practice policies were ‘ripe for challenge’, adding that it has appointed Jeffrey Gruder QC of Essex Court Chambers as counsel.
Mishcon declined to say how many businesses are represented in the action, which is the third such group it has established to challenge insurers’ declinatures on business interruption claims.
Mishcon is also representing the Hospitality Insurance Group Action. The hospitality group is challenging Aviva as well as QBE.
‘The issue for dentists is similar in many ways to that experienced by the other businesses whom we also advise’, Sonia Campbell, partner and head of the insurance disputes practice at Mishcon, said. ‘Dental practice owners responsibly insured themselves against the risk of financial losses, including from notifiable diseases, and yet, just like those in other trades, soon learned that their claims have been rejected.’
The challenge will focus on wording set out in QBE’s ‘office insurance’ policy on business interruption.
It is one of 17 sample policy wordings that will be included in a High Court test case to be brought by the FCA.
A spokeswoman for QBE said the company did not comment on litigation-related matters.
The UK-wide lockdown has hit dentists, who have been ordered to stop all non-emergency treatment.
The government has said that companies in the retail, hospitality and leisure sectors do not need to pay business rates, for the rest of the year, however that has not been extended to the private dentistry sector.
The British Dental Association (BDA) found in a survey of its 22,000 members that only 70% believe they can remain financially viable for the next three months. The BDA announced last month that it has appointed law firm Brown Rudnick LLP to examine the policies of its members who have had business interruption claims rejected. A spokesperson for the BDA did not respond to a request for comment on whether it is considering litigation as a result.
A spokesperson for Mishcon confirmed its group action is separate from any being considered by the BDA.
This content is based on articles first published by Law360, a LexisNexis® company, on 5 June 2020 and is published with permission.
Further information can be found at: www.law360.com/insurance-uk (subscription required).
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