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Claiming interest on Covid Business Interruption payments

Posted on 11 January 2024

News that QBE has paid more than £386,000 to companies for delays in covering COVID-19 related business interruption losses will be welcome news to other policyholders whose claims were initially and wrongfully rejected. 

The payout was made following the decision of the Financial Ombudsman to award a complainant policyholder interest on sums that its insurer, QBE, delayed in paying out for over a year. 

QBE initially declined the claim in April 2020 but, following the Supreme Court's landmark decision in the FCA business interruption test case, it accepted liability and made payment in late 2021. 

Noting that, notwithstanding the clarity provided by the Supreme Court's decision, the initial decision to reject the claim was incorrect, the Ombudsman concluded that it was appropriate to compensate the policyholder for not having money it would otherwise have had if its claim had been settled at the time it was made in 2020. 

The Ombudsman therefore awarded interest of 8%, in line with the rate normally awarded on judgment debts, from the date the claim should have been settled (two months after the insured losses started), until the ultimate date of settlement.

Unlike court decisions, decisions of the Financial Ombudsman are not precedents. Nevertheless, having reportedly sought further clarification of the ruling, QBE now appears to have accepted that it is appropriate to make similar payments in relation to claims by other policyholders, with an average payout of £4,500 to each of the 86 claimants concerned. 

While each case will ultimately need to be considered on its own facts, and it is notable that in the case considered by the Ombudsman the amount to be paid by the insurer was reduced in light of a "bounce back loan" taken out by the policyholder when the claim was originally rejected, these latest developments indicate that policyholders whose insurers delayed paying COVID-19 BI claims should now consider seeking additional compensation.

Indeed, the decision against QBE followed a very similar decision by the Financial Ombudsman against QIC Europe. In that instance, the Ombudsman again rejected the insurer's argument that it was reasonable for it to have waited for the outcome of the FCA test case in the Supreme Court before paying claims. QIC Europe was required to pay 8% interest on the value of the claim, accruing from a point one month after the policyholders had first submitted the claim to QIC until the date they entered into a bounceback loan. The insurer was also required to pay interest of 2.5% on the difference between an interim payment offer and the ultimate settlement, from the date that interest became payable on the bounceback loan.

To find out more about the decisions, and their implications, please contact Ralph Fearnhead or Leah Alpren-Waterman.

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