DRN-6265836

The complaint L, a limited company, complains about a claim it made on its HCC International Insurance Company Plc (‘HCC’) business interruption insurance policy. L says HCC treated it unfairly following a claim on the policy. L’s complaint is brought by Mr P, but I shall refer to all submissions as if they are L’s own for ease of reference. What happened In February 2026 I issued a provisional decision in which I said: “I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having done so, I intend to depart from the investigator’s findings and uphold L’s complaint against HCC. Before I explain why I wish to acknowledge the volume of submissions made by both parties and L’s strength of feeling about its complaint. Whilst I’ve considered everything that’s been said, I won’t be addressing it all. That’s not intended to be disrespectful. Rather, it is representative of the informal nature of the Financial Ombudsman Service. Instead, I’ll focus on the crux of L’s complaint, namely whether HCC treated it unfairly and if so, what it needs to do to put things right. The starting point is the policy terms. They say: “Underwriters will indemnify You for loss of Gross Profit including Increased Cost of Working resulting from Damage at the Premises which causes interruption of or interference with Your Business provided that: a) An Insured Event which results in a valid claim under this Policy, has occurred under Section A of this Policy, or b) payment has been made or liability admitted for the Damage under an insurance covering Your interest of the Property Insured at the Premises, or c) payment would have been made or liability admitted for the Damage but for the operation of a provision in such insurance excluding liability for losses below a specified amount.” In this case there was a flood at L’s business premises which led to some of its items becoming damaged such as a commercial fryer, fridge and freezer. L says its business premises remained closed longer than it should have because HCC caused delays in paying out its claim for the items that were damaged, which meant it was unable to trade. L’s main concern is its claim for business interruption which it says amounts to about a year’s worth of loss because of the delay caused by HCC in dealing with its contents claim. In this case HCC has said it’s only prepared to pay 8 weeks’ worth of business interruption because that is how long L should have remained closed for had it been properly insured for its commercial fryer. HCC says L was underinsured by about 64% for this item and that is what led to it not being able to reopen when it should have. HCC also accepted that it

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caused considerable delays in dealing with L’s claim and has offered it £400 in compensation in respect of this. I’ve considered what both parties have said in support of their positions and the timeline of this claim. I can see that the damage occurred in December 2023 at which point L reported it to the water company responsible for the flood who made arrangements to rectify the, building in which the business was operating. Following this L made a claim on its HCC policy in February 2024 for cover for its contents and business interruption after it became clear the water company would not be compensating it for these. After considering the claim with the benefit of specialist evidence, HCC made its first interim payment in respect of L’s contents claim in October 2024 for £5,500. A further payment was made in January 2025 for contents amounting to £1,230.52. A final payment was paid in June 2025 which HCC says represents the business interruption claim for 8 weeks of interruption. This was for £12,403.57. I can quite understand HDI’s view that L’s failure to properly insure its fryer meant it could not trade as soon as it should have. On the other hand, L says that HCC didn’t pay it for the remainder of its contents until January 2025, which also meant it couldn’t trade as it didn’t have a working commercial refrigerator or freezer. Like the investigator I agree that L did have a duty to mitigate its loss by funding the replacement of items as soon as it could, we wouldn’t necessarily expect a policyholder to do this if the cost is prohibitive. In this case it took HCC until October 2024 to pay L anything on account for its contents. The flood happened in December 2023. Although I understand the claim wasn’t reported until February 2024, L was still out of pocket for a period of 8 months from the date of the claim being made before anything was paid to it. I don’t think this was reasonable nor that HDI’s offer of compensation of £400 adequately takes account of this delay. The purpose of business protection insurance is to protect a business from losses incurred if it’s not able to trade. Even if I discount the underinsured proportion of L’s fryer, I don’t think it was fair for HCC to expect L to replace all its commercial items itself like its refrigerator and freezer before HCC provided it with any help in respect of this like a payment on account. And given the first payment didn’t arrive until 8 months after L made its claim, I think HCC should fund the business interruption complained of up to this point. When reaching this conclusion, I’ve also taken into account that L was underinsured and that we do expect commercial policyholders to mitigate their losses. In this case if L had been properly insured and had some reserves available, it could have replaced its fridge and freezer itself and had the commercial fryer replaced when HCC paid it £5,500 on account. So, it should have been able to start trading again on or around this time. That’s why I think 8 months is a more reasonable period than the 8 weeks paid by HCC. I don’t however think L is entitled to 12 months’ worth of business interruption because I think the underinsurance put it in a position where it couldn’t help itself in the way we would expect. I understand HCC have not included any offset against the business interruption insurance claim for a saving of rent. That’s because L has not supplied its lease to help HCC assess whether a rent cessation clause applies. If L wants its claim for 8 months of business interruption to be properly considered, it will need to supply HCC with its lease so any savings can properly be taken into account when assessing its claim under the policy terms. I turn now to the time it took HCC to deal with L’s claim and the impact of the delays more generally. As I’ve said, the claim was not paid out in finality for about 11 months. Whist I can appreciate some of the reasons for this, I don’t think this timeframe is justified in the circumstances of L’s claim. And whilst L can’t experience distress as a company, I think this matter would have caused it a great deal of inconvenience. As such I think HCC should also pay it the £400 in compensation it has proposed.

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Putting things right HCC should: • Reassess and pay L’s claim for business interruption for a total of 8 months instead of 8 weeks. HCC will be entitled to offset anything it has paid in respect of this specific claim to L against the total. • Pay L interest of 8% per year simple on the business interruption claim as a whole from three months from when it was made, until it is paid. The three-month period reflects the time it should have taken HCC to properly assess this claim. • Pay L £400 in compensation for the delays in dealing with its claim.” I asked both parties to provide me with any further comments or evidence in response to my provisional decision. L has confirmed its acceptance of my findings. HCC however dispute the outcome I have reached. In summary, HCC ‘s submissions relate to the extent of L’s underinsurance and the fact that L would have always had to self-fund a considerable amount in relation to the replacement fryer itself in light of this. As such HCC feels that this should be taken into account when reaching my decision on this complaint. They’ve also referred to L’s Director being a Director of several other shops of the same business type. Because of this, HCC feel it was not unreasonable for Mr L to have had both knowledge and understanding of the costs associated with running these sorts of businesses. Overall HCC maintain that L had a duty to mitigate its losses and it did not do so here. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having done so, I remain of the view that L’s complaint should be upheld for the same reasons and in the same way set out within my provisional findings. I appreciate the submissions made by HCC, but they have no bearing on the 8-month delay I have referenced in paying L anything at all in respect of its claim. And given L was without payment for its contents claim during this time, which included cover for its commercial refrigerator and freezer, that were also essential to its ability to trade, I don’t think the underinsurance problem in relation to the fryer was the only obstacle preventing it from trading. I accept that L did have to fund at least £10,000 itself in relation to the fryer in order to obtain a working replacement, even after HCC paid its claim for £5,000 for the insured amount. But even so, L had still not received anything at all in the form of payment from HCC for 8 months, and the sums it did receive were on a piecemeal basis. Certainly, the first payment HCC made in October 2024 did not cover both the insured cost of the fryer and the commercial refrigerator and fryer. Had HCC paid for the fryer and L’s contents claim much sooner, I might have been more inclined to accept their position. But in this case the contents claim was not settled in full for about 11 months, which left L exposed to considerable business interruption. In light of the delay in making payment and the fact that we wouldn’t expect policyholders (no matter what their level of commercial experience) to mitigate all of their losses, if the cost of doing so was prohibitive, I don’t think HCC have properly made out that L is not entitled to a business interruption payment for at least 8 months. I have limited that claim value to 8 months rather than 11 months, which accounts for when

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the totality of the contents claim was settled. This takes into account an expectation of some mitigation by L after the first payment was made by HCC to it. HCC have said they’ve been asked to settle a claim for gross profit of over £10,000 per month against a net sum insured for a replacement fryer of only £5,000 and an average contents claim of around £1,730. It’s not my role to determine exactly what HCC needs to pay L in respect of its claim for business interruption, but rather to direct them to reassess the same in line with the policy terms over a total duration of 8 months instead of 8 weeks. The cost of the contents claim, and the value of the business interruption sought by L is therefore in my view immaterial. Putting things right HCC should: • Reassess and pay L’s claim for business interruption for a total of 8 months instead of 8 Weeks in line with its policy terms. HCC will be entitled to offset anything it has paid in respect of this specific claim to L against the total. • Pay L interest of 8% per year simple on the business interruption claim as a whole from three months from when it was made, until it is paid. The three-month period reflects the time it should have taken HCC to properly assess this claim. • Pay L £400 in compensation for the delays in dealing with its claim. My final decision For the reasons set out above, I uphold L’s complaint against HCC International Insurance Company Plc and direct them to put things right as I have set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask L to accept or reject my decision before 22 May 2026. Lale Hussein-Venn Ombudsman

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