Service Decision Reference 2023-0254

• Case Outcome: Partially upheld
• Year: 2023
• Date: 20 November 2023
• Reference: 2023-0254
• Subject Matter: Service
• Finantial Sector: Insurance
• Conducts Complained Of: Claim handling delays or issues

Decision Ref:

2023-0254

Sector:

Insurance

Product / Service:

Service

Conduct(s) complained of:

Claim handling delays or issues

Outcome:

Partially upheld

LEGALLY BINDING DECISION OF THE FINANCIAL SERVICES AND PENSIONS OMBUDSMAN

The Complainant is a limited company trading as a hostel, hereinafter ‘the Complainant

Company’. The Complainant Company held a Commercial Insurance Policy with the

Provider. The policy term in which this complaint falls, is from 15 July 2019 to 14 July 2020.

The policy provided the Complainant Company with business interruption gross profit

cover of €125,000.00 (one hundred and twenty-five thousand Euros) for an indemnity

period of 12 months. This complaint concerns the Provider’s calculation of its claim

settlement offer, made in response to the Complainant Company’s business interruption

claim.

The Complainant Company’s Case

The Complainant Company says that it notified the Provider of a claim for the business

interruption losses it sustained due to measures imposed by the Government in March

2020 to help curb the spread of coronavirus (COVID-19).

The Complainant Company says that in its letter dated 12 October 2021, the Provider’s

Loss Adjustor advised that the recoverable loss for the indemnity period from 16 March

2020 to 15 June 2020 had been calculated at €9,975.00 (nine thousand nine hundred and

seventy-five Euros) and that this was its claim settlement offer.

The Complainant Company says that the Provider further advised that it had calculated the

Complainant Company’s gross profit for the year ending 31 December 2019, to be

€530,987.00 (five hundred and thirty thousand, nine hundred and eight-seven Euros) and

that because the Complainant Company had only purchased business interruption gross

profit cover in the amount of €125,000.00, the adequacy of the sum insured was 23.54%

(€125,000.00 ÷ €530,987.00) and that accordingly, €9,975.00 was the claim settlement

offer after the gross profit loss had been proportionately reduced by the level of

underinsurance.

The Complainant Company does not accept the Provider’s claim settlement offer of

€9,975.00.

The Complainant Company says that it is insured for a loss of gross profit arising from a

business interruption. It says in that regard, that the Provider was wrong, in determining

that the value at risk, the gross profit, was €530,987.00, in that the Provider calculated this

amount based on its turnover for the year ending 31 December 2019, and not based on its

actual gross profit.

The Complainant Company says in this regard that its declared gross profit for the year

ending 31 December 2019 was €218,906.00 (two hundred and eighteen thousand, nine

hundred and six Euros) and that because the sum insured for business interruption gross

profit was €125,000.00, the adequacy of the sum insured was therefore 57.1%

(€125,000.00 ÷ €218,906.00), as opposed to the 23.54%, that the Provider calculated.

The Complainant Company sets out its complaint in the FSPO Complaint Form it

completed, as follows:

“Claim for Loss of business due to Covid-19 - Complaint in relation to the calculation

of underinsurance by insurers.

[Complainant Company] to the best of [its] knowledge used a sum insured for gross

profit - Accounts that have been issued to revenue have a gross profit sum insured.

[Provider] are using the turnover instead of the gross profit on [Complainant

Company’s] last set of accounts – [Complainant Company’s] accountant has clearly

set it out in writing.

Gross profit on accounts sent to Revenue amounts to €218,906 – [Provider] are

using €530,987 instead which is reducing the [claim settlement] offer by [Provider]

by [two-thirds]. Legal (sic) the accountant figures on gross profit are correct as tax

is paid for on that basis”.

The Complainant Company notes that its Accountant advised in its email of 27 January

2022 that:

“We note that the matter has been referred to an “expert accountant” dealing with

the matter for [Provider].