Business interruption claims in the UK and the role of an independent loss assessor

Loss assessor or loss adjuster: who is on your side

British vocabulary can be confusing. A loss adjuster is appointed and paid by the insurer to investigate the claim, check that it falls within the policy and recommend a settlement. Many are members of the Chartered Institute of Loss Adjusters. A loss assessor, sometimes called a public loss assessor, is appointed by the policyholder to prepare and negotiate the claim on the policyholder's behalf. The term public adjuster, common in North America, is rarely used in Britain.

Both can be competent and honest, but their duties point in different directions. On an interruption claim, where the numbers are built from projections and judgement calls, having someone whose job is to argue your figures can change the outcome.

Reading the interruption section of your policy

Most UK commercial policies only pay for interruption if there is insured physical damage at the premises, or at a location named in an extension such as suppliers, customers or denial of access. The assessor starts by mapping which trigger applies and what basis of cover you bought.

• Basis of cover: gross profit, gross revenue, increased cost of working or a combination
• Maximum indemnity period, which caps how long losses are counted
• Sum insured, and whether an average clause can reduce payment for underinsurance
• Extensions: suppliers, customers, utilities, denial of access, loss of attraction
• Exclusions and any time excess, such as the first few days of closure

Lessons from the COVID-19 test case

The FCA business interruption test case, decided by the Supreme Court in January 2021, showed how much depends on the exact wording of disease and denial of access clauses. It also reminded businesses that interruption cover can respond in ways the insurer did not initially accept. A good assessor reads your wording line by line instead of relying on what a policy of that type usually covers.

From notification to settlement

Notify your broker or insurer as soon as the incident happens, even if you are not yet sure of the size of the loss. Policies normally require prompt notice and reasonable steps to minimise the interruption, for example renting temporary premises or outsourcing production. Those costs may themselves be recoverable as increased cost of working.

The insurer then appoints an adjuster, who will visit and request information. Your assessor can attend that meeting, agree an information schedule, and ask for an interim payment once the first months of loss are documented. Interim payments matter: a business that runs out of cash while waiting for a final figure may never reopen. Settlement usually happens after the indemnity period ends or once trading has clearly recovered.

Evidence that makes the difference

An interruption claim is won with figures. The assessor, often with your accountant, compares actual results with what the business would have earned, taking into account trends, seasonality and any special circumstances that were already affecting trade.

• Statutory and management accounts for at least two to three years
• VAT returns, bank statements and monthly sales reports
• Budgets, forecasts and signed orders that show expected growth
• Payroll records and evidence of staff retained or laid off
• Invoices for temporary premises, overtime, hire equipment and extra marketing
• Correspondence with customers who cancelled or moved to competitors

Where insurers and businesses tend to disagree

Typical disputes concern the trend adjustment, with the insurer arguing that turnover would have fallen anyway; savings, where the insurer deducts costs it says you no longer had to pay; the end of the indemnity period; and whether extra spending was economic, meaning it reduced the loss by more than it cost. Underinsurance is another flashpoint, because a gross profit sum insured set too low can trigger the average clause.

Timeframes and complaints

If you are unhappy with how the claim is handled, complain in writing to the insurer first. Under the FCA's complaint rules, the insurer generally has eight weeks to issue a final response. If you remain dissatisfied, eligible micro-enterprises and small businesses can refer the dispute to the Financial Ombudsman Service, normally within six months of that final response. Larger businesses may have to rely on negotiation, mediation or the courts, so check eligibility early.

Limitation periods for legal action also apply, and claims for late payment can be possible in some situations under the Insurance Act 2015 as amended. Ask a solicitor for advice before any deadline approaches.

When appointing an assessor makes sense

An assessor is most useful when the closure is long, the business has seasonal or growing trade, several locations or suppliers are involved, or the insurer has already questioned your figures. For a short closure with simple accounts, your accountant and broker may be enough. In every case, ask for a written engagement letter that explains the fee basis before work starts.

An interruption claim rewards preparation: a clear reading of the wording, solid accounts and a steady flow of evidence. Whether or not you appoint an assessor, the guides on expertdassure.com can help you ask the right questions.