Insurers must pay cash now to save firms

THOUSANDS of small companies are still at risk of collapse as insurers may not pay coronavirus claims made on their business interruption policies in time, lawyers and industry groups warn.

On Friday, the Supreme Court ruled that Hiscox, RSA, Arch, Argenta, QBE and MS Amlin should honour claims made by small to medium size enterprise (SME) clients to cover the losses they suffered during the first lockdown. The Supreme Court test case covers 370,000 policy holders and could cost the insurance sector £1.8billion.

However, as insurers have spent the last 10 months trying to bat away Covid-19 claims, businesses and the lawyers representing them fear that payouts may not appear in time to prevent a wave of collapses.

Mishcon de Reya partner Richard Needham, who represents the SMES that form the

Hiscox Action Group, said: “Lots of businesses are hanging on. What is vital is that we get the money flowing. Every week we hear from clients that they are about to go under or that they are in the process of doing so.

“That money is the difference between businesses being able to keep their heads above water and going under.we’re in a third lockdown and insurers still haven’t paid out for the first. There is no question that businesses are struggling.”

Night Time Industries Association chief executive Michael Kill said the need for insurers to pay out is pressing because “most of the cash reserves have gone” at a number of businesses.

The lockdowns and virus restrictions have hammered the hospitality sector particularly hard, from larger operators such as nightclubs group Deltic and Revolution Bars, to smaller, independent outfits.

Kill said: “This [the Supreme Court ruling] is great but if insurers do not expedite the process, businesses will continue to go under. Every day another viable business goes to the wall.”

Emma Mcclarkin, chief executive of the British Beer & Pub Association, agreed: “This is great news for our sector and now the insurers must make sure they move quickly and pay up.

“Pubs are still far from out of the woods and they need all the help they can get, which makes getting these payouts they are owed out quickly all the more critical.”

Kill added that the Government needs to provide the hospitality sector with a clear roadmap out of lockdown and that companies need time to prepare, both in terms of logistics and their finances.