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COVID-19 ignites wave of claims against UK businesses

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Seven in 10 business have already had claims registered against them, according to a study. Photo: Dinendra Haria/SOPA Images/Sipa USA
Seven in 10 business have already had claims registered against them, according to a study. Photo: Dinendra Haria/SOPA Images/Sipa USA

The coronavirus pandemic is expected to spark a wave of claims against UK businesses, with thousands of firms facing allegations about how they have handled COVID-19.

Seven in 10 (70%) business have already had claims registered against them, according to research among claims management companies, conducted by global risk management and insurance brokerage Gallagher.

There is expected to be a 40% rise in litigation compared with previous years due to COVID-19, the research found.

The “vast majority” of the claims management companies involved in the research had already seen claims, of those that hadn’t yet, three-quarters (76%) said they were expecting a rise in claims in the next few months.

COVID-19-related claims being lobbied at companies include workplace and premises-related safety violations and negligence, with issues around the lack of PPE at the start of the pandemic likely to be a big issue.

READ MORE: Just one-third of UK workers received financial support after self-isolating

Other allegations that have come up as a knock-on effect of the pandemic include unfair dismissal and discrimination, with the majority of these claims likely to be as a result of job losses.

There is also likely to be a rise in complaints from other stakeholders in firms, such as shareholders, as the long-term impact of decisions made by business leaders during the pandemic begin to unfold.

Claims related to employees and customers catching COVID-19 on an organisation’s premises were the most common claims made so far, with employees making 14% of all claims registered and customers making 11% of claims.

Some 12% of claims were related to staff feeling overworked, or unsupported, while 8% were discrimination cases and 4% were unfair dismissals, according to the research.

The NHS and healthcare sector has been the hardest hit by legal action, receiving 11% of claims registered so far. The care sector was second with 9%, followed by the public sector (7%), and hospitality (7%), retailers (4%), manufacturers (4%), and charities (3%).

The average claim value submitted by employees so far came to £5,500 and for customers £7,500. The amounts are likely to include compensation for illness and any subsequent losses. Legal negligence claims, if successful could end up being much more, according to the experts at Gallagher.

READ MORE: Brexit and COVID-19 pushes UK finance sector to cuts jobs and re-evaluate office space

The legal fees incurred by businesses to defend themselves against claims are also likely to cost firms much more than the claim values themselves. Claims made by businesses or shareholders that have lost money could cost firms hundreds of thousands in defence fees and claim values.

Over half (52%) of the business leaders reported feeling seriously concerned that they will be sued by someone in the future who says they caught COVID-19 on their premises, leaving the business facing costly legal fees, according to a separate study by Gallagher.

One in three (31%) Brits said if they caught COVID-19 from a specific place, which caused them illness or a financial loss, they would consider making a claim, the research found.

“Organisations operating during COVID-19 face a variety of risks and organisations could find themselves with claims from employees, customers and third parties in the event they were put at risk or contracted COVID-19 on their premises and it can be proved they haven’t followed government guidelines as closely as possible,” said Neil Hodgson, managing director, Gallagher Risk Management.

“Businesses could also face claims that they have mismanaged the situation generally, which has damaged the value of the firm, or cost individuals their jobs and these types of claims can be particularly costly.

READ MORE: MPs slam HMRC for tax system 'quirks' leading to abuse and Brits missing out on COVID-19 relief

“From an employer perspective, failing to take measures to safeguard staff, such as lack of PPE or defective equipment, could result in an employers’ liability claim being made – with this in mind, it is telling that the NHS and care homes feature prominently in the sectors facing litigation.

“Organisations that can prove they have kept abreast of advice and can show they have interpreted it carefully, taking into account the particular characteristics of the business and workforce, should be well-placed to defend claims. However this doesn’t mean that attempts won’t be made and legal fees may need to be paid even in the event the claim is unsuccessful, which is why it is important to have insurance in place that will cover these costs.”

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