Charities should be checking their insurance policies after it emerged that some organisations could be missing out on business interruption cover payments totalling tens or even hundreds of thousands of pounds as a result of the lockdown, according to a leading charity finance specialist.
Stef Smith, charities manager at chartered accountants Lovewell Blake, says that many charities risk missing out on insurance pay-outs because they don’t realise that business interruption cover may apply to some of their activities.
The issue is particularly relevant where charity shops were forced to close through the Covid lockdown, or where other activity based income – such as hiring out facilities to other organisations – was not possible because of coronavirus restrictions.
“I am aware of business interruption insurance payments ranging from £5,000 to £300,000 made to charities operating in our region,” said Mrs Smith.
“It’s unlikely that many charities would be eligible for amounts at the top end of this scale, but for organisations which have seen their trading income hit by the pandemic, claiming on insurance policies which they have been paying premiums for could make a big difference at a time when traditional fundraising has been very difficult.”
“Following the changes surrounding business interruption claims, I would urge every charity to check their insurance policies to see whether they include business interruption cover, and if so, to speak to their broker or insurance to identify if a claim is possible..”
Such cover will not provide protection against the decline in traditional fundraising activity, but it could pay out when other activities (such as charity shops) have been interrupted by lockdown, or rental income has been lost due to the pandemic.
“Each policy is different, and it will be a case of checking what is an isn’t covered,” said Mrs Smith.
Mrs Smith also urged charities not to take no for an answer if they believe they should be covered, and to pursue through their broker if appropriate. This follows examples of insurance companies attempting to claim that business interruption insurance does not cover a global pandemic – a claim which was rejected by the Supreme Court in a test case heard in January.
“Charities’ incomes have been hard-hit by the pandemic, just as demand for their services has in many cases peaked,” said Mrs Smith. “If they have been paying insurance premiums over the years, it is important that they ensure that they make a claim if they are entitled to do so – their beneficiaries are the ones who will ultimately lose out if they don’t.”
The Charities Commission reports that there are 3,536 charities registered as working in Norfolk, and 3,188 in Suffolk.