A legal expert has weighed in on the viability of a potential group action against a broker for negligence in a business interruption insurance dispute
A group of UK nursery owners looking to bring a negligence case against their insurance broker in relation to a business interruption dispute are unlikely to win if it does end up in court, according to a legal expert.
Jacqueline Young, head of group actions at legal funding firm Augusta Ventures, was commenting on the potential class action against Ipswich-based Pound Gates.
It was reported by Nursery World this week that between 90 and 100 nursery owners could file a lawsuit against the company after claiming to have been misadvised over what is covered within their policies if they’re forced to close.
After they had their resulting business interruption claims denied by underwriter Ecclesiastical Insurance, Joshua Fellenbaum, director in the dispute resolution team at law firm Fieldfisher, said “there could be a case to bring for negligence against the insurance broker”.
But Young said, in reality, such a case would be very hard to put forward.
Why nursery owners could lose business interruption insurance dispute
“You’d have to row back from the fact they’ve signed a policy of insurance, so they’ve accepted all of the terms therein,” she told NS Insurance.
“A broker is only broking a policy. At the end of the day, you’re presented with terms of insurance, which you can accept or decline.
“Unless there is clear evidence that a broker has made a negligent or fraudulent misstatement and misled the nursery owners as to the terms of the policy, I would be surprised if it took with the courts.”
The potential legal case is the first time a broker has been implicated in a dispute over business interruption, and the policy in question – underwritten by Ecclesiastical, which could also be targeted by a lawsuit, according to the initial report – does include coverage for non-physical damage, but only in relation to a set of listed diseases, which doesn’t include Covid-19.
It’s for this reason Young believes it would require a “very creative” approach to push forward in court, and she questions whether it will even get that far.
Referencing Fellenbaum’s statement, she added: “It will be interesting to see whether this does become anything more than a throwaway comment – I don’t think it will start a trend.”
FCA’s approach could remove the need for creative legal approach in business interruption insurance dispute
Looking at the broader picture of business interruption disputes, and the group litigation building against certain insurers, Young believes the FCA took the correct approach by intervening to seek a high court judgment last week.
While she doesn’t see a trend evolving in which brokers are taken to court for negligence for misadvising clients in regard to their business interruption policies, she said the FCA’s action, if done right, should remove the need for creative approaches like the nurseries’ dispute completely.
The more pertinent question both she and Augusta Ventures managing director Robert Hanna believe needs to be answered is whether the current state of business interruption insurance products reflects the risks that firms face – something that has been brought into question by Covid-19.
“I know I speak for my colleagues at Augusta when I say we hear about those racing to put groups together and rush off to litigate, but now is the time for pausing for thought, looking at the bigger picture – and hoping the FCA can quickly and swiftly deal with what is a precarious situation and bring about a resolution that doesn’t require litigation,” Young added.
“That is clearly in the best interests of the economy.”