During these difficult times, we are working as hard as we can to provide advice and support to our clients and policyholders. We recognise that all businesses throughout the UK are facing unprecedented challenges, regardless of the industry or sector they are operating in.
The medical aesthetics sector is finding it particularly hard due to the fact that practitioners work closely with their customers and patients. Following the Government’s lockdown announcement, business premises have had to close and appointments have therefore also been cancelled or deferred. Even when restrictions in movement are relaxed, social distancing and non-essential contact will be in place for some time.
Whilst these trying financial times are undoubtedly difficult for the sector, it is heart-warming to see that many practitioners are volunteering to return to the NHS to help with the battle in keeping the virus under control. We would like to thank you for the huge efforts and sacrifices you are making to keep us safe and well.
During the past three weeks we have received countless enquiries from concerned, and often distraught, practitioners seeking advice on what to do regarding their insurance policies and how these policies can support them and their businesses during the outbreak.
We cannot provide definitive advice and guidance to all our policyholders as every practitioner has unique circumstances but we can comment on common issues which we outline below.
Medical Malpractice/Indemnity Insurance
This insurance has been purchased from Hamilton Fraser Cosmetic Insurance by the vast majority of our policyholders and covers their financial liability (including defence costs) should they cause physical or mental injury, whether un-intentional or otherwise, to their patients following an insured procedure.
Medical malpractice insurance policies are underwritten on what’s called a ‘claims made’ basis. This means that in order for a policy to respond to any allegations of injury, you must have a relevant policy in force at the time you performed the procedure and at the time you notify us of a claim, without any break in cover during the period of time between the two actions.
Many practitioners are calling us to cancel their malpractice policies or are allowing their policies to lapse at renewal. We understand these decisions as the practitioners are not trading and looking to conserve cash. Insurance is often seen as a non-essential spend. A good proportion of these practitioners are advising us that they will re-purchase insurance from us when they resume trading.
We would caution all our practitioners to consider carefully these decisions. Patients have several years in which to make a claim against their cosmetic practitioners for any injuries caused by the procedures whether their allegations are founded or otherwise. All claims, whether vexatious or not, have to be defended by us and your insurers. If at the time of the notification of a claim it is found that there is no cover in place or that there was a break in policy coverage, regardless as whether you were insured at the time of the procedure, we will not be able to assist and your policy will not respond. Bearing in mind third party awards and defence costs can run into thousands of pounds even for a simple botulinum toxin procedure, you could find yourself liable with no insurance backing.
Our advice is to continue your insurance coverage despite the COVID-19 circumstances. Both you and us want you to return to normal trading without the financial threat of legal action from disgruntled patients, or no-win no-fee lawyers, when the lockdown is lifted.
Some of our practitioners have advised us that they are giving up entirely their practice and do not expect to resume trading at all. Under normal circumstances we would strongly suggest ‘run-off’ cover to protect the practitioner for a period of years for past work done. Again, we would urge you to consider strongly this extended cover for at least a year which will protect you for past work whilst recognising that you are undertaking no new treatments.
Most of these decisions are being made out of financial despair and we fully appreciate and understand this. To try and assist, we have negotiated with your insurers what we are calling ‘hibernation cover’. For practitioners whose policies are due for renewal in April and May, during the period of lockdown and extended social distancing, we will ‘hibernate’ your policy for a period of up to two months (depending on your renewal date in that period) at no charge and reinstate full cover at full premium after the two months have elapsed. This will provide you with unbroken cover and ensure that you have the peace of mind you need when you return to full trading. Whilst the policy is in ‘hibernation’, we will not cover you for any new treatments/procedures but will protect you against past procedures and the notification of possible claims. You can pay the annual premium (combination of the reduced two months of hibernation and 10 months of full cover) either in full at the start of the policy or monthly by direct debit. If you opt to pay by direct debit, we urge you not to cancel your payments as this will affect the policy including the hibernation period and you will have no cover at all. You cannot purchase the hibernation cover on its own.
We hope that this solution will suit most practitioners and is unique to Hamilton Fraser Cosmetic Insurance. We will continue to monitor the uptake of this solution and will continue to review it as we understand more about the Government’s plans for reintroducing free movement for people.
Salon and Surgery Insurance – specifically Business Interruption cover.
We have received many enquiries and claims for possible financial support under the business interruption section of our Clinic, Salon and Surgery Business Insurance policy.
Like you, we are deeply troubled by the decision of the vast majority of the insurance market not to honour claims submitted under this section of the policy. For most policyholders, there are specific exclusions regarding notifiable diseases and countrywide closure of trading premises written into their policies. For other policyholders the position of cover is ambiguous.
Regardless, the insurance industry has been quick to make statements that the business interruption sections of their policy wordings were not designed or intended to deal with pandemics such as COVID-19, and indeed there has been no precedent to support the payment of claims due to a worldwide virus outbreak.
Most insurers are now global corporations and their exposures span multiple continents. Insurers argue that payment of claims in one territory will set a precedent for payments in another territory. As such this will cause their financial failure thus affecting multiple types of risk not affected by the virus shutdown e.g. motor or home insurance. The meltdown in the travel industry is by far the greatest threat to insurers and is where most of the anger is directed.
Some of the policies we have provided to our customers, notably those underwritten by Hiscox, contain the ambiguous form of business interruption cover. We have made strong representations to Hiscox, and other insurers, regarding what we see as their duty to honour claims where we consider the policy wording allows, and where it is the right thing to do however, Hamilton Fraser Cosmetic Insurance is a FCA authorised broker rather than an insurer, and we do not make the final decision as to whether a claim should be paid or not. This decision ultimately lies with the insurer providing the security behind the policy. We may have justifiable influence in the payment of claims during normal trading times, but COVID-19 is not ‘normal’.
Despite Hiscox, and others, recognising the frustration, disappointment and anger of our policyholders, they are unable provide us with any certainty regarding business interruption claims. In fact they have made the decision to decline all claims relating to COVID-19. They claim to have strong legal advice supporting this decision and are directing policyholders, who wish to take their decision further, to contact the Financial Ombudsman Service (FOS) who are the Statutory complaints handling service for insurance products sold in the UK. We understand, at this time, that insurers will adhere to decisions and orders to pay claims from the FOS unless a legal challenge by the industry is launched.
Hamilton Fraser Cosmetic Insurance can assist you by providing you with information as to how to contact the FOS. You do not need to have had your possible claims rejected by your insurer as public statements by insurers have already been made which relate to all COVID-19 related claims.
Notwithstanding any decisions you make to pursue your claim via the FOS, we need to stress that the FOS will be inundated with similar issues and a decision relating to your own circumstances will take some considerable time. There is no guarantee that the FOS will find in your favour and Hamilton Fraser Cosmetic Insurance will not be able to influence this decision.
Hiscox, selected by Hamilton Fraser Cosmetic Insurance to protect you and your business, are excellent insurers and provide an unrivalled level of cover to ensure that the vast majority of claims submitted to them are honoured. However, the issues of this particular business interruption cover could not be foreseen and took an unprecedented and global virus to identify the weakness in the cover. We would continue to recommend Hiscox as your insurer albeit with more clarity surrounding the exclusions exposed by COVID-19.
In the meantime, we urge you to take advantage of all government support that may be available to you and your business over the next few months. Any possible claim accepted by Hiscox on the instruction of the FOS, will rely on you taking steps to mitigate your losses wherever possible. This will include the furloughing of staff if possible, reducing non-essential financial outlays, deferment of tax and self-declared income tax, and applying for government backed business interruption loans and support for the self-employed. You will need to prove the level of lost business which generally will be calculated by the levels of trade undertaken in the same period over the past few years. Ensure your financial books are completely up to date. For further official government guidance visit their website.
The Association of British Insurers has also published some information to help insurance customers – you can find answers to commonly asked questions here.
We will notify you if there are any changes in the approach taken by Hiscox and the wider insurance marketplace.
We understand your anger and distress but we do not feel it right to provide you with false hopes and inaccuracies. We prefer to provide the facts as they happen. We are fighting your corner behind the scenes but we will have to wait for any legal challenge/FOS direction for us to take your claims further.
In all other areas, we continue to do our best to provide you with the support and guidance throughout these difficult times. Our own business is experiencing similar financial and administrative disruptions at the same having to deal with the human and emotional distress as everyone else is.
But we are proud to support the medical industry, whether elective or non-elective, and this guidance is designed to help you when we come out the other side of this national and international crisis.
CEO Hamilton Fraser Cosmetic Insurance