Do I have a negligence claim against my Business Interruption Insurance Broker?

Many policyholders now will be seeking legal advice on whether they can claim for business interruption insurance as a result of the COVID-19 pandemic. If you are seeking advice from that, the quickest way to find out is to send our Business Interruption Insurance solicitors your policy and we will let you know whether you have a claim.

But what if you don’t have business interruption insurance and your insurance broker told you that you would be covered? Why did the insurance broker fail to offer adequate cover? Did the insurer fail to assess your needs and offer cover that you wanted?

The Courts in recent times (and the Insurance Act 2015) have expanded the duty of care owed by insurance brokers to their clients and have readily supported claims issued for negligence where the broker has recommended or mis-sold an insurance product (particularly in circumstances where a financial incentive is offered by an underwriting insurer).

We provide expert legal advice on professional negligence claims against insurance brokers and underwriters. If you have been given bad advice or have a complaint about an insurance broker it is important that you take independent legal advice to seek compensation for your loss before the time limits expire (usually six years).

What is Business Interruption insurance?

Business interruption insurance covers businesses for loss of income during periods when the business cannot trade as usual due to an unexpected event.

The aim of BI insurance is to put a business back in the same trading position it was in before the unexpected event occurred.

What does Business Interruption insurance usually cover?

Normal claims would ordinarily encompass events such as flooding, storm damage or fire and cover may be provided for:

  • Profits: Based on a business’s prior months’ performance
  • Fixed costs: for example operating expenses and other incurred costs of doing business.
  • Temporary relocation: Some policies may insure the cost moving to and operating from a temporary business location.
  • Extra expenses: reimbursement for reasonable expenses (beyond the fixed costs) that allow the business to continue operating.
  • Employee wages: Such coverage can aid a business owner make payroll when they cannot operate.
  • HMRC Taxes: Tax coverage can ensure a business can pay taxes on time and avoid penalties.
  • Loan repayments: Insurance could cover monthly loan repayments even when the business is not generating income.

Has your insurance broker failed to offer adequate business interruption insurance coverage?

You may have a complaint against an insurance broker if they have failed in their task to consider your needs as a client and as such you have been recommended an insurance policy which is not suitable for your needs.

Insurance brokers are held to a high standard of care. The UK financial services industry in general is regulated by both the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). In particular, brokers are mandated to conduct themselves within the framework set out by the FCA. In addition, insurance brokers are regulated by the British Insurance Brokers’ Association (BIBA) which includes a code of conduct for brokers to follow including:

  • ABIDE BY ALL RELEVANT LAWS, PRINCIPLES AND REGULATIONS. Understanding and ensuring we comply with regulatory principles and work within the law.
  • ACT WITH INTEGRITY AND HONESTY. We should conduct ourselves in a fair, reliable, trustworthy and respectful manner with all our stakeholders.
  • ACT IN THE BEST INTERESTS OF EACH CLIENT. We have a duty to act in a manner which pays due regard to the best interests of each client and ensure decisions and recommendations are based on a clear understanding of their needs, priorities, concerns and circumstances.
  • ACT WITH SKILL, CARE AND DILIGENCE. We act at all times with high levels of skill, care and diligence.

Have I been advised to enter into an unsuitable business interruption insurance policy?

If you have been provided bad advice and subsequently entered into an insurance policy with insufficient cover, then you may have a claim for compensation. For example, if you have been mis-advised to enter into any of the following insurance policies:

  • Professional indemnity insurance;
  • Public liability insurance;
  • Travel insurance;
  • Before the Event (BTE) insurance cover (for example for legal fees);
  • After the Event (ATE) insurance policies (covers claimants following an adverse costs order made against them);
  • Employer’s liability insurance.

Insurance brokers are used by several professionals and businesses for insurance products. Your broker could be negligent if they have failed to renew insurance within the timeframe allocated, failing to inform you of your insurance being invalid, not insuring all risks which was specified and not following your instructions resulting in financial loss.

Common examples of negligence by an insurance broker

  • Failure to provide adequate insurance cover for your needs;
  • Failure to follow your instructions;
  • Failure to renew a policy once you have advised them to do so;
  • Failure to insure all risks that you have specified; and
  • Providing a far too restrictive insurance product.

Which duties does an insurance broker owe to their clients?

In Jones v Environcom [2010] the Court assessed insurance brokers’ duties to clients. In particular, the Court held that an insurance broker is under a duty to:

  • ensure the client understands what has been advised;
  • advise on duty to disclose all material facts and explain the consequences of failing to do so. 

How do I prove that my insurance broker has been negligent for a business interruption claim?

Like all negligence actions, in order to claim compensation, the following three elements need to be made out by a claimant to prove the tort of negligence against an architect:

  1. Duty of care – The defendant insurance broker/firm owed the claimant a duty not to cause the type of harm suffered.
  2. Breach of duty – The insurance broker breached the duty owed.
  3. Causation – This has two elements, both of which must be proved i.e. (a) factual causation in that the claimant must prove, but for the defendant’s negligence, they would not have suffered loss and (b) legal causation or remoteness in that the defendant’s negligence was the legal cause of loss.

Looking for a solicitor that can offer a DBA?

When you instruct us to resolve your legal problem, your case will be dealt with by highly qualified and experienced lawyers.

A Damages-Based Agreement (DBA) is an arrangement whereby legal fees are only payable in the event the instruction is successful. We are open to offering DBAs as a means of furthering access to justice to individuals or companies that have a strong legal claim that cannot otherwise be pursued due to the costs of obtaining expert legal advice.

The firm is made up of exceptional lawyers who are practising solicitors and barristers supported by high quality paralegals, legal apprentices and other legal support staff. We regularly work in conjunction with leading Queen’s Counsel and junior barristers from chambers predominantly in London near to our own chambers in Middle Temple. The strength of the legal teams available to our clients helps ensure matters are progressed efficiently and the very best results are obtained for our clients.

Book an Initial Consultation with our Professional Negligence Lawyers

Do you have a claim against a professional? If you want expert legal advice, do not delay in instructing us so we can assess the legal merit of your case.

We can often take on such claims on a no win no fee basis (such as a Conditional Fee Arrangement or Damages Based Agreement) once we have discussed the claim with you and then assessed and advised you on the merits of the proposed professional negligence action.

Our expert legal team of leading Professional Negligence Solicitors & Barristers can provide urgent help, advice or representation to you. Just call our Professional Negligence Lawyers on 02071830529 or email us now.

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LIMITATION ACT 1980 – WARNING

The Limitation Act 1980 sets out strict statutory deadlines within which you must bring litigation claims. Your legal rights will become irreversibly time-barred if you fail to take legal action (or defend a claim on time). Therefore, you should seek specific legal advice about your legal dispute at the very first opportunity so that you understand the time you have left. Failure to take advice or delay in taking action can be fatal to your prospects of success.

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