Update about Business Interruption Insurance and the impact for hut operators.
Business interruption insurance covers you for loss of income during periods when you cannot carry out business as usual (i.e. that your hut is fully open for use) due to an unexpected event. It aims to put your business (the hut) back in the same trading position it was in before the event occurred.
There was much discussion last year as to whether business interruption claims would be accepted due to the enforced closure of club huts (and many other businesses). So during 2020 the Financial Conduct Authority (FCA) took a test case to the High Court to resolve this uncertainty around the validity of many business interruption claims made due to Covid-19 restrictions. The High Court handed down its judgment on the 15 September 2020 in favour of many of the arguments put forward by the FCA; this then went to the Supreme Court who delivered its judgement on 15 January 2021, again largely in favour of the FCA and against the insurers.
This means that clubs who have their hut(s) insured with Hiscox, via the BMC’s insurance brokers Howden, may be able to claim for loss of income suffered through the enforced closures of their hut(s) by government due to the Covid-19 pandemic. Any who insure their hut with another company will need to contact their own insurer for more detail.
The BMC has received the following statement from Howden in relation to whether a club may be eligible to submit a claim:
In respect of policies where there is a list of notifiable diseases, but that list doesn’t include COVID-19, those policies are not affected by the Supreme court ruling. Business interruption claims for loss of income resulting from COVID-19 will not be valid under those policies.
Many of the BMC huts are insured with Hiscox, and from 01 June 2020 the Hiscox policies were amended to be on the above basis. Any renewals enacted since then will be on this new wording. Any Hiscox policy that a hut/club incepted prior to June 2020 may respond to claims during that policy period.
The advice would be that if a club has suffered a loss of income due to the lockdown they should contact the Claims Team at Howden and submit the details. We will then be able to review each individual position and advise each club specifically. Clubs should contact the Claims Team – mountaineering@howdengroup.com.
By 23rd March 2020 all club huts across the UK were closed due to the UK-wide lockdown, and since that time no hut has been able to re-open fully. There was a period last summer where many huts re-opened but occupancy was significantly lower than usual due to limits on the number of households who were able to stay at the same time, social distancing, and implementing a break of 72hours between bookings (as per the BMC guidance). The good weather we had in the summer of 2020 alongside the low hut occupancy levels were certainly an unfavourable combination for achieving optimal income generation! Since last summer different parts of England, Wales and Scotland have had different restrictions at different times, but all the restrictions placed limitations on hut usage and the ability by club members to use their club hut.
For hut operators wishing to make a claim it is important that they consider the complete picture for their hut from mid-March 2020 to now in order to identify any potential loss of income.
Other Grants, and their impact on a claim
The BMC is aware that many hut operators successfully received the Covid19 Business Support grants for their hut(s) from their local authorities during the first lockdown in 2020. Many have also received subsequent grants for more recent (and the current) lockdowns and localised restrictions.
These hut operators may feel that any income lost due to lack of use of the hut by members, guests and visiting groups during the lockdowns / restrictions has been compensated by the government grants received. This would not preclude a club from submitting a claim under their Business Interruption insurance, but it is worth noting that the insurance is there to put the policyholder back in the position they were in pre-claim so a club will, in theory, only be able to claim for income they have actually lost.
Information about grants that are available to hut operators are detailed here.
We want to make a claim for our hut, what should we do?
The first step is to consider what your income loss has been from mid-March 2020 to now, factoring in any income that you have received during that time. Use previous annual accounts for comparison and for evidence.
Then send a short email to the Claims Team at Howden - mountaineering@howdengroup.com – and explain which club you are from, your policy reference and a summary of what your losses are.
You will then get a response from Howden advising of your next step.
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