Covid: Could you claim for business interruption?

If your business was adversely impacted by the coronavirus pandemic, then you may wish to consider whether your insurance covered you for business interruption – as you could be due an insurance pay-out in relation to your loss of earnings.

When calculating your loss of earnings, there are a number of factors that you should consider, inclusive of the following:

• Ensuring that you have strong management accounts for prior periods to demonstrate to the insurer what your expected earnings would have been, against what they were
• You should also account for any savings that your business made as a result of the pandemic, which could include:
  • Furlough grants, plus the additional 20% of staff wages saving, if staff were furloughed at 80% of their usual wages
  • Any other grant support from local councils/government directly related to supporting the business

Note: insurers should not factor in grants such as the Leisure & Hospitality grant due to this support not being directly linked to businesses, but instead available at the same amount to all businesses within this industry

To ensure that your loss of earnings calculation is correct, you should also factor in the following points;

• Did you have to refund any amounts to customers at a later date, that might not be factored in your original management accounts?
• Did you incur additional costs throughout lockdown periods such as infection control measures for staff continuing to work?
• Were any furlough overclaims subsequently repaid back to HMRC, as this would increase your loss of earnings?

Insurers will create their own workings to confirm what they expect your loss of earnings to be for these periods, and this calculation may differ to your original workings. To ensure that your claim is maximised, you should ensure that:

• Average past performance is used where relevant – if your business is seasonal and therefore earns more in better weather, you may be able to demonstrate to insurers that your earnings would have been higher for the period April – June 2020 due to the weather
• Insurers are using the same basis to calculate loss of earnings as you are – it might be the case that segments of your business were still able to operate and in this scenario you would have two options:
  • Calculate loss of earnings for elements of the business unable to trade
  • Calculate loss of earnings for the business as a whole – in this scenario you should make sure you compare your total expected income/expenditure with the total actual figures

You should also be aware that insurers will not consider reimbursements to customers where you were not contractually obliged to do so.

If you wish to discuss any of the points above further, or would like any assistance with your business interruption insurance claim, please do get in touch.

Disclaimer - All information in this post was correct at time of writing.