Storm brewing as insurers seek to reject Covid-19 claims

Minister for Finance Paschal Donohoe knew before calling in the chief executives of the State's five retail banks into his offices last week he would get the headlines he wanted, with the industry agreeing to payment holidays for borrowers affected by the Covid-19 crisis.

The Banking & Payments Industry Federation even managed the following day to get a bunch of so-called vulture funds, their agents and other non-bank lenders to agree to the accord (albeit with final details to be ironed out, which undoubtedly will throw up its own issues).

Meanwhile, another battle is brewing. And the Minister’s officials are beginning to understand that they will struggle to deliver the same favourable press releases.

Insurers are rejecting claims for business interruption caused by coronavirus because the disease is not one of those listed in the small print of policies, or because the Government did not order the closure of thousands of businesses – including pubs, cafes, restaurants and creches – that decided to pull down the shutters on foot of advice from the State.

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Policy interpretation

The Department of Finance said it has been in contact with the industry in recent days and let it be known the Minister "believes that insurers should not attempt to reject claims on the basis of interpreting policies to their own advantage".

Specifically, he believes that a business closing as a result of Government advice or direction amounts to the same thing and business interruption claims paid out – where coverage is in place.

The industry claims that very few such policies exist, as the “standard of cover that the majority of businesses purchase does not include forced closure by authorities, as it is intended to respond to physical damage at the property which results in the business being unable to continue to trade”.

Insurance Ireland warned the solvency of its members could be hit if insurers were forced to pay out on uncovered claims – with no recourse to their own reinsurers.

The bigger issue is that no insurer in Ireland – which are all, with the exception of FBD, owned by overseas groups – wants to set a precedent here that could have repercussions in their larger markets. This one’s likely to run and run.