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Small businesses are being urged to persist with insurance payout claims covering losses brought on by the Covid-19 pandemic, despite average delays of up to eight months and “ridiculous” levels of evidence being required.

In September 2020, the High Court ruled that small stores suffering a reduction of trade due to Covid-19 closures could claim for losses, subject to policy limits.

The companies included were Arch Insurance, Argent Syndicate Management, Ecclestical Insurance Office, MS Amlin Underwriting, Hiscox Insurance Company, Royal & Sun Insurance and Zurich Insurance.

At the time, the Financial Conduct Authority ordered firms to pay compensation at the “earliest possible date to support businesses”. However, many failed to receive their settlements and were advised to lodge a complaint with the Financial Ombudsman Service (FOS), which settles complaints between consumers and businesses.

Last week, Capital Law’s senior lawyer, Catrin Povey told betterRetailing that the FOS was asking for “ridiculous levels of evidence” to prove businesses were affected by Covid-19 on their premises.

“They are asking businesses to provide medical records to confirm a suspected diagnosis of Covid-19, or positive Covid-19 tests to prove the disease was to blame for their store closure in March 2020, which isn’t possible in most cases because people were told not to seek medical attention unless symptoms were severe and testing wasn’t widespread,” she said.

“Witness statements should be enough for a civil court case to prove on the balance of probabilities, but instead the FOS is expecting businesses to look for evidence that will be impossible to find.”

Policies requiring the occurrence of Covid-19 on the premises in the short period prior to the government announcing its restrictions, typically ask for evidence, and FOS admits the difficulty of demonstrating this.

In some cases, submission of evidence has been deemed insufficient, not because FOS believes it to be false, but symptoms were more likely to have been caused by other seasonal illnesses, such as colds and flu.

betterRetailing understands the FOS has received more than 4,000 complaints, of these about 3,300 have been resolved, and a further 300 have received an initial answer. Some complaints have had responses more quickly due to similar policies being grouped together, but FOS now expects to work through the remaining cases more quickly.

Despite the challenges posed, Povey encouraged store owners to continue fighting. “I understand how time-consuming it can be for small business owners,” she said. “But there is evidence to suggest cases are being worked on, even if it is taking longer than expected. Continue putting pressure on the FOS.”

Have an unresolved business interruption insurance case? Contact betterRetailing on 07597 588972 for free legal advice

Find out more on our coronavirus information hub for retailers