MSP Asks First Minister To Tackle Insurance Companies Who've Wriggled Out Of Their Obligations

6th May 2020

The First Minster is to ask the Scottish Government Finance Secretary, Kate Forbes, to have direct discussion with the insurance sector about companies who are "wriggling out of their obligations" to Scottish businesses.

Highlands and Islands Labour MSP, David Stewart, asked Nicola Sturgeon today at First Minister's Questions about the problems firms were having claiming their business interruption insurance.

He said: “The First Minister will be well aware that thousands of small business across Scotland, from hotels to hardware stores, are trying to claim on their insurance policies because of interruption of their trading caused by the lockdown.

“However, several insurers have been accused of wriggling out of their obligations which puts the future of many businesses at risk.

“Will the First Minister meet with insurance companies and spell out that leadership and social responsibility are crucial during the pandemic so that we can still have a functioning economy when the lockdown ends?”

Nicola Sturgeon replied: “I am very clear insurance companies, like everybody else who has a responsibility right now, should play fair and should understand the difficulties that businesses are having through no fault of their own.

“I send that message without equivocation. I think anyone trying to wriggle out of obligations right now is doing a disservice to the challenge that all of us are facing and dealing with.

“Certainly, I am happy to ask the Finance Secretary to have a more direct discussion with the insurance sector just to make sure there is an understanding and to makes sure there is nothing further that we can do to in terms of guidance to provide clarity about what people should be doing and how they should be acting.”

Afterwards Mr Stewart added: “I am grateful that the First Minister recognises the problem and hope that any discussion with the insurance section can bring home how devastating it is for companies who have had their claims for business interruption insurance turned down.

““Companies who can’t claim are at risk of going under sooner and that puts the whole local economy at risk.”

Last month Mr Stewart found widespread frustration and concern from Highlands and Islands firms over delays in accessing loans and a refusal to pay out on business interruption insurance.

The MSP wrote to business groups across his area asking if banks were making it harder to get business interruption loans and if insurers were refusing to pay out for claims on business interruption insurance policies.

Among those to respond to the MSP’s request, were Chambers of Commerce in Caithness, Moray, Lochaber and Mid-Argyll.

Last month, Moray Chamber of Commerce’s Chief Executive, Sarah Medcraf, told the MSP: “I have not come across one business who has been able to claim on their insurance for this”.

She went on to give examples of responses from insurance companies including:

“Unfortunately, there is no cover in place which would allow you to claim for this particular pandemic, sorry to be the bearer of bad news.”

“To clarify, COVID-19 is not covered under our standard Business Interruption policies and, as the chancellor said, you cannot retrospectively change insurance contracts at this time without threatening the future of the insurance industry.”

“Unfortunately, there’s no cover for this type of loss on your policy. You’re right, we’ve been busy with queries, worrying times. The only cover, Liability &/or Business Interruption, for a specified disease would be if the disease originated at your premises or within a five-mile radius.”

Trudy Morris, Chief Executive of Caithness Chamber of Commerce said: "We are deeply concerned that even businesses who believed they had purchased appropriate insurance cover are not having success in making claims. We are finding that either businesses are being told they are not covered as COVID-19 was not named on their policy, or because it has not been confirmed on their premises.

"While we appreciate the pressures that the insurance industry will be facing at this time, it is disheartening that many businesses have paid a premium for this kind of cover only to discover that their claims are being denied. It is incumbent on the UK and Scottish Governments to work together to find a solution to this issue and ensure that businesses can survive this crisis."

Jane MacLeod, of Mid Argyll Chamber of Commerce, had also been made aware of many businesses unable to claim business interruption insurance.

She told Mr Stewart; “One local hotelier said ‘my policy, like many other businesses, states ‘Infectious Disease’ as a reason with the usual list. Plague is listed but it has to come from within the business and not outside in. If it came from inside I would have a personal liability in that I allowed it into the workforce.” The hotelier went on to say ‘Blatant avoidance’ “.