A law firm has sent a “letter before action” on behalf of a group of diversified farm businesses who had their business interruption claims due to Covid-19 declined by a rural insurer.
Penningtons Manches Cooper, based in London, has sent a letter to NFU Mutual on behalf of dozens of businesses affected by the coronavirus pandemic, claiming a breach of contract for non-payment of business interruption insurance.
A source familiar with the claim believes many of the law firm’s claimants are in the hospitality sector, a significant proportion of which are diversified farming businesses, such as those offering wedding, camping, bed and breakfast or catering facilities.
The letter, seen by Farmers Weekly, states that the claimants suffered from business interruption losses after prime minister Boris Johnson ordered various closures during the first Covid lockdown in March 2020.
These businesses then continued to be hindered by subsequent lockdowns and Covid-related restrictions introduced by UK government.
One farming claimant, who wished to remain anonymous, said: “In good faith, we paid our premiums to NFU Mutual for years to protect us against a once-in-100-year event.
“The worst thing happened. Our business was shut down during coronavirus and we reached for the comfort and the security of the longstanding relationship with NFU Mutual and it turned to total ash.
“This was extremely distressing. Businesses up and down the country are struggling.”
Endorsement in policy
Penningtons Manches Cooper associate Colin Hayes said the claims are based on an endorsement contained within the policy schedule.
He added: “There is an endorsement within many NFU Mutual insurance policies, including for many diversified farming businesses, which we believe should provide cover that they [NFU Mutual] are not yet paying out on.”
Mr Hayes said the claimants “lost millions” during the lockdown and each may be entitled to claim some of those losses back from NFU Mutual.
He points to a Supreme Court ruling from January 2021 in a Financial Conduct Authority (FCA) business interruption test case, which found in favour of insurance policyholders and widened the scope for claims for possible losses caused by Covid-19.
“Our claim relies on the Supreme Court decision, which overruled a High Court judgment on a number of points that the claimants say are relevant to their case and which put in place a much more favourable approach for policyholders, including on points that were not specifically appealed to the Supreme Court,” Mr Hayes explained.
Response from NFU Mutual
NFU Mutual has asked for the full three months to respond to the letter from Penningtons Manches Cooper and its own lawyers are currently in the investigation period.
The deadline to submit their response is Monday 21 March 2022.
An NFU Mutual spokesperson said: “We can confirm that we have received correspondence from Penningtons Manches Cooper.
“In the FCA [Financial Conduct Authority] test case, the High Court decided that Prevention of Access wordings similar to NFU Mutual’s do not provide cover for Covid-19 restrictions as they only cover local incidents, of which the typical examples were a bomb scare, a gas leak or a traffic accident.
“This finding was not appealed to the Supreme Court, unlike other parts of the High Court judgment.
“As a result, the High Court decision confirms that NFU Mutual’s Prevention of Access cover does not respond to Covid-19 related losses.”