For a small business, an insurance claim is rarely just an insurance problem. If a serious loss prevents the business from trading normally, the consequences can quickly spread to cash flow, staff, customers, suppliers and the future of the business itself.

A fire can close a restaurant. An escape of water can damage a shop. Machinery can be put out of action. Stock can be destroyed. A professional negligence allegation can arrive unexpectedly. A cyber incident can prevent a company accessing the systems it depends upon.

Revenue may stop while wages, rent, finance and supplier bills continue.

That is the point at which an insurance policy stops being something renewed once a year and becomes something the business genuinely depends upon.

And it is also the point at which some business owners discover that buying commercial insurance was considerably easier than making a substantial claim under it.

Why do small-business insurance claims become disputed?

Commercial insurance can become complicated because the phrase “business insurance” can encompass many different forms of cover.

A commercial policy may contain cover for buildings, contents, machinery, stock, business interruption, liability, professional indemnity, cyber risks, vehicles, goods in transit, legal expenses and other specialist risks.

One event can engage several sections of the policy at the same time.

A serious fire at a manufacturer, for example, might involve the building, machinery, stock and business-interruption cover. The insurer may accept some parts of the claim while disputing others.

Common reasons a business insurance claim may be rejected or reduced

The details differ from claim to claim, but the same problems appear repeatedly.

• The insurer says the event is not covered.
• A policy exclusion is being relied upon.
• The insurer alleges wear and tear, deterioration or poor maintenance.
• The business is said to be underinsured.
• The insurer says a policy condition was not complied with.
• Notification is alleged to have been late.
• The insurer says something material was not disclosed when the policy was arranged.
• The insurer disputes what caused the damage or loss.
• A loss adjuster has reduced the proposed scope of work.
• The amount claimed is disputed.
• The business-interruption calculation is materially lower than expected.
• An expert report is being relied upon against the business.
• The insurer says there is insufficient evidence.
• The claim has become stuck in investigation without a clear decision.

Sometimes those conclusions will be justified.

Sometimes they will not.

A rejection letter, loss-adjuster report or settlement calculation is ultimately a conclusion. A useful claim review examines how that conclusion was reached.

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The checker looks at:

✓ What the insurer is actually disputing

✓ The policy wording or condition being relied upon

✓ Evidence, causation and valuation issues

✓ Whether escalation or litigation may need consideration

Question 1 of 5 Your answers are only sent when you submit

Question 1 of 5

What has happened to the business insurance claim?

Choose the position that most closely describes the problem.

Claim rejected The insurer has refused all or most of the claim. Settlement too low The claim is accepted but the amount appears inadequate. Partly refused Some parts have been accepted and others rejected. Claim delayed The claim is taking too long or has stopped progressing. Underinsurance reduction The insurer says the business was inadequately insured. Another problem The dispute does not fit neatly into the options above.

Question 2 of 5

What type of commercial insurance claim is it?

Choose the closest category.

Commercial property Buildings, contents, stock or equipment. Business interruption Lost income or increased costs following an insured event. Public liability Third-party injury or property damage. Employers' liability A claim involving an employee and the business. Professional indemnity Alleged negligent professional work, service or advice. Product liability Damage or injury involving a supplied product. Cyber Cyberattack, data incident or system interruption. Commercial motor Fleet, business vehicle, theft, damage or valuation. Goods / stock / transit Damaged, stolen or lost commercial goods. Commercial landlord Property damage, landlord cover or loss of rent. Other Another form of business insurance.

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Question 3 of 5

Approximately how much is at stake?

A broad estimate is sufficient.

Under £10,000 £10,000 – £25,000 £25,000 – £50,000 £50,000 – £100,000 £100,000 – £250,000 £250,000+

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Question 4 of 5

What reason has the insurer given?

Choose the closest match.

Policy exclusion The insurer says an exclusion removes cover. Underinsurance / average The insurer says values declared were too low. Wear and tear / maintenance The insurer disputes the insured cause. Policy condition A warranty, security condition or other requirement is relied upon. Non-disclosure / fair presentation The insurer says important information was not disclosed. Late notification The insurer says the matter should have been reported earlier. Causation disputed The insurer disputes what caused the loss. Value disputed The amount or scope of the loss is disputed. Insufficient evidence The insurer says the claim has not been sufficiently proved. No clear reason / other The insurer's position is unclear or different.

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Final question

Where has the dispute reached?

Choose the current position.

Insurer still dealing with it No final decision yet. Decision received The insurer has rejected or reduced the claim. Formal complaint The matter is within the insurer's complaints process. Final response received The insurer's complaint process has concluded. Ombudsman involved The matter has already been referred externally. Legal proceedings / solicitors Lawyers or proceedings are already involved.

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Enquiry received by IDS

There are issues that deserve closer examination.

Your answers identify several areas that may be important when assessing the insurer's position.

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Your Business Claim Check is now with Insurance Dispute Service.

We have received the information you entered. Where you uploaded the insurer's decision, it has been included with the enquiry.

You do not need to submit the same information again.

If the dispute appears suitable for further review, IDS can use this assessment as the starting point.

The IDS Small Business Insurance Claim Checker provides preliminary information only. It is not legal advice and does not determine whether a claim will succeed. A full assessment may require the policy wording, insurer correspondence, expert evidence, valuations and the individual facts.

Which small businesses can encounter these problems?

Almost any business can experience an insurance dispute. The underlying risks differ, but the questions of policy wording, causation, evidence and valuation recur across sectors.

Business interruption claims: where small assumptions can create large differences

Business interruption is one of the areas where commercial insurance claims can become particularly technical.

Property damage can often be photographed and costed. Lost trading is different.

The business is effectively asking what financial position it would probably have been in had the insured event not occurred.

That can involve historic turnover, gross profit, variable costs, savings, seasonal trading, growth, trends, increased cost of working, temporary premises and the indemnity period.

A rapidly growing business may believe that historic accounts understate what it would otherwise have earned. The insurer may use a different projection.

A relatively small difference in methodology can therefore produce a substantial difference in settlement.

Underinsurance: a potentially expensive surprise

Underinsurance can remain invisible until the business suffers a significant loss.

Rebuilding costs increase. Machinery becomes more expensive. Stock values rise. Premises are improved. Turnover grows. Additional equipment is acquired.

The insured values do not always keep pace.

Following a claim, the insurer may allege that the business should have been insured for considerably more and seek to reduce the settlement.

If underinsurance is raised, the business should understand the calculation rather than simply accepting the label.

• What does the insurer say the correct value should have been?
• How was that figure calculated?
• What valuation basis does the policy require?
• Has the correct reinstatement basis been used?
• How has any proposed reduction been calculated?
• Was professional advice received when the policy was arranged?
• Does the policy contain wording relevant to underinsurance or average?

Commercial property claims

Commercial property claims can involve fire, flood, storm, escape of water, subsidence, theft, malicious damage, stock, equipment, fixtures and rebuilding costs.

The insurer may dispute the cause of the loss, the scope of the damage, the amount required to reinstate the property — or all three.

For example, an insurer's surveyor may say damaged property can be repaired while the business's specialist believes replacement is necessary.

That is not simply an argument about price. It can be a dispute about what work is reasonably necessary to deal with the insured damage.

“You didn't tell us” — fair presentation and disclosure disputes

For non-consumer insurance contracts, the Insurance Act 2015 introduced the duty of fair presentation. Broadly, a business must make a fair presentation of the risk before entering into the insurance contract.^[2]

An insurer may therefore investigate what information was provided when a substantial claim is made.

The dispute could concern the business activity, turnover, previous claims, premises, security arrangements, subcontractors, hazardous work or another aspect of the risk.

But an allegation that something was not disclosed does not end the analysis.

The Insurance Act contains different remedies depending on the nature of a qualifying breach and what the insurer would have done had a fair presentation been made.^[3]

Important questions can therefore include what the business knew, what it ought to have known, what was communicated to the broker, what the insurer received and what difference the disputed information would actually have made.

Policy conditions and warranties

Commercial policies can contain requirements concerning alarms, locks, fire suppression, electrical inspections, extraction equipment, storage, security, maintenance, occupancy and working practices.

Following a loss, the insurer may investigate whether those requirements were followed.

A rejection letter may then state that a policy term or condition was breached.

The precise wording of the term, what actually happened and the legal effect of the alleged breach may all matter.

The Insurance Act 2015 contains provisions dealing with warranties and terms intended to reduce particular risks.^[4]

Professional indemnity claims

A professional business can face a very different form of insurance dispute.

A client may allege negligent advice, defective design, incorrect calculations, missed deadlines or financial loss.

Professional indemnity disputes can involve when the business first became aware of a potential circumstance, when the insurer was notified, which policy year responds, exclusions, policy limits, aggregation and defence costs.

Notification can be particularly important because a customer complaint that initially appears minor can later develop into a substantial professional claim.

Public, product and employers' liability claims

A customer is injured. Work damages another property. An employee suffers injury. A defective product causes loss. A third party seeks compensation.

The business may expect the insurer to take over.

Disputes can concern whether the activity was insured, when the event occurred, subcontractors, exclusions, defective workmanship, product exclusions, notification and whether the insurer accepts indemnity.

Cyber insurance disputes

A cyber incident can cause several losses at the same time. Systems may become inaccessible, information may be compromised, money may be stolen and trading may stop.

Cyber policies can contain detailed definitions and security requirements.

Disputes can involve ransomware, social engineering, stolen credentials, authentication systems, security controls, backups, business interruption, data restoration and third-party liability.

A loss involving a computer system is not automatically covered by every cyber policy. Equally, an insurer's rejection should be tested against the cover actually purchased and what happened.

What if the insurer is taking too long?

Delay can become financially serious for a small business.

Repairs may be waiting. Customers may move elsewhere. Wages and rent continue. Stock may deteriorate. The company may be trading only partially.

FCA claims-handling rules require insurers to handle claims promptly and fairly, provide appropriate information about progress, not unreasonably reject claims and settle promptly once settlement terms are agreed.^[5]

That does not mean every complicated commercial claim should be concluded immediately.

The more useful question is what is causing the time to pass.

The insurance broker may also matter

Many small businesses arrange cover through a broker.

Sometimes a disputed claim exposes questions about the way the policy was originally arranged.

Was the business activity described accurately? Was the appropriate cover selected? Was the sum insured adequate? Was business interruption cover calculated appropriately? Were important restrictions explained?

That does not mean a broker is responsible merely because an insurer has rejected a claim.

But in some cases two different questions may need consideration:

1. Has the insurer dealt with the claim correctly?
2. Was the insurance arranged correctly in the first place?

Seven questions to ask before accepting the insurer's position

1. What exact policy wording is the insurer relying upon?

Do not stop at “not covered”, “wear and tear” or “underinsurance”. Identify the clause and how the insurer says it applies.

2. What evidence supports the insurer's conclusion?

Is there a surveyor's report, engineer's opinion, calculation, photograph, trading analysis or other evidence?

3. Is the insurer disputing cover, cause or value?

Those are different disputes and may require different evidence.

4. Has the whole insured loss been considered?

This can be particularly important where physical property damage also causes business interruption.

5. Is an expert opinion being treated as unquestionable?

Experts can disagree, and technical conclusions can depend upon assumptions or incomplete information.

6. If underinsurance has been applied, is the calculation correct?

Ask how both the value at risk and the proposed reduction have been calculated.

7. What is the strongest next step?

Further evidence, direct challenge, negotiation, complaint, Ombudsman or litigation should not be selected automatically. The route should follow the assessment of the claim.

What documents should a small business preserve?

Once a substantial claim becomes disputed, preserving the evidence becomes increasingly important.

• Policy wording and policy schedule.
• Statement of fact or proposal information.
• Broker correspondence.
• Insurer correspondence.
• Rejection letters and final responses.
• Loss-adjuster reports.
• Surveyor or engineer reports.
• Photographs and video.
• Contractor estimates and scopes of work.
• Invoices and stock records.
• Valuations.
• Accounts and management accounts.
• Business-interruption calculations.
• A short chronology of the claim.

Should a small business automatically go to the Financial Ombudsman?

Eligible small businesses may be able to use the Financial Ombudsman Service, and for some disputes that may be an appropriate route.

But it should not be treated as the automatic destination for every commercial insurance disagreement.

A claim may first require better evidence, clarification of policy wording, an independent valuation, technical evidence or a properly structured challenge to the insurer.

For substantial commercial losses, other routes may also need consideration.

Understand the claim first. Choose the route second.

Why litigation experience matters in a business insurance dispute

A substantial commercial insurance dispute should not necessarily be approached as though it is simply a complaint that needs a strongly worded letter.

Where significant sums are at stake, the dispute may ultimately turn on contractual interpretation, technical evidence, causation, expert opinion, valuation and the ability to prove the loss.

That is why Insurance Dispute Service approaches significant commercial insurance disputes with escalation and litigation in mind from the outset.

This does not mean every business insurance dispute should result in court proceedings. In many cases, a properly evidenced challenge, negotiation or another resolution route may produce the better outcome.

But litigation experience changes the questions that are asked at the beginning.

This approach can be valuable even where proceedings are never issued.

A dispute which has been properly analysed and evidenced is usually in a stronger position for meaningful negotiation than one built largely around repeated disagreement with the insurer.

Where appropriate, IDS can also bring barrister expertise into the dispute and litigation process. That means the business does not have to discover at a late stage that its case needs to be reconstructed simply because the dispute has become more serious.

How Insurance Dispute Service helps small businesses

Insurance Dispute Service specialises in the review and resolution of rejected, underpaid, delayed and disputed commercial insurance claims.

We are not limited to preparing complaints. Our dispute and litigation experience means we can examine a claim from the outset with a more important question in mind:

That can involve examining the policy wording, exclusions and conditions, the insurer's reasoning, loss-adjuster reports, expert evidence, causation, valuation, underinsurance, business-interruption calculations, claim chronology and any issues arising from the way the insurance was arranged.

The strongest route may be further representations to the insurer, additional evidence, negotiation, a formal complaint, an Ombudsman route where appropriate, or litigation.

The important point is that the route follows the assessment of the dispute rather than the business being pushed automatically towards one process.

Frequently asked questions

Sources and further reading

1. Financial Ombudsman Service — Business protection insurance complaints
2. Insurance Act 2015 — Duty of fair presentation
3. Insurance Act 2015 — Insurers' remedies for qualifying breaches
4. Insurance Act 2015 — Warranties and other terms
5. FCA Handbook — ICOBS 8: Claims handling

This article provides general information about business insurance disputes and does not constitute legal advice. The appropriate approach depends on the policy wording, evidence, value, applicable time limits and individual circumstances of the claim.