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Law360, London (May 20, 2020, 1:53 PM BST ) A legal group representing small businesses in the hospitality sector said Wednesday it will focus its group litigation on QBE and Aviva as insurers which have rejected claims for business interruption resulting from the nationwide pandemic lockdown.
The Hospitality Insurance Group Action, one of two groups coordinated by City law firm Mishcon de Reya LLP, said it had made the decision after reviewing 500 business policies submitted by applicants between late April and early May.
It will now seek to secure funding for the group litigation by June 10 and file a legal claim shortly afterwards. The group has appointed Philip Edey QC of Twenty Essex chambers as counsel.
Mishcon is also coordinating litigation over rejected business interruption policies for the Hiscox Action Group, made up of more than 400 businesses with a total claim of almost £40 million ($49 million).
The hospitality group was formed to co-ordinate a swathe of claims outside the Hiscox action. The group said it is "best advised" to challenge four specific policies issued by QBE and one from Aviva.
"The decision to limit a potential HIGA legal challenge to just two insurers with specific wordings was always going to be difficult, and we recognize many HIGA applicants will be disappointed we are unable to act for them," Sonia Campbell, partner at Mishcon, said.
Mishcon has invited businesses within the hospitality sector — hotels, bars, restaurants and nightclubs — which are not part of the action group to sign up if they want to join the group litigation.
An Aviva spokesman said standard business interruption policies do not cover losses from the pandemic. But he added that a "small number" of policies bought through a broker might provider cover. In those cases, payments have already started being made, the spokesman added.
A spokeswoman for QBE declined to comment.
Mishcon said it will contact all the 500 businesses it had examined policy wordings on behalf of, but that only those with the specific QBE or Aviva policies will be able to participate in the group action.
Business interruption policies typically offer cover only against closures of a business premises resulting from damage to property. But some policies offer extensions to guard against public authorities ordering a business to close as a result of a contagious disease outbreak.
The Association of British Insurers and several other companies have said the policies were never intended to offer cover against pandemics.
The Hiscox Action Group and HIGA have emerged as the biggest groups to mount a challenge to the insurance industry. But at least three smaller groups are weighing action, guided by the Night Time Industries Association and law firms Wright Hassall LLP and Fenchurch Law Ltd.
Alongside those moves, the Financial Conduct Authority plans to take a sample of representative policy wordings to court as early as July to get what it calls an authoritative declaratory judgment on whether insurers are responsible for paying compensation. The findings will be legally binding on insurers, the FCA said.
--Editing by Ed Harris.
Update: This story has been updated to add comment from Aviva.
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