Commission-hungry claims firms target Covid-hit businesses


  • No-win-no-fee solicitors and claims management companies are aggressively advertising following a Supreme Court judgment on business interruption
  • Some firms are looking for a cut of up to 40% of any damages
  • Businesses may be able to avoid costly legal fees if they first go to their broker
  • CMCs and solicitors maintain they provide a vital service and argue not all insurers will play fair on claims
  • The publicity surrounding BI cover has encouraged new entrants into claims management
  • Policyholders need to be wary of clone firms and scammers that are not regulated
  • Industry commentators warn BI must not go the way of PPI where it comes to CMC tactics

Claims firms and no-win-no-fee solicitors have ramped up attempts to get businesses to make Covid-related claims with them following the Supreme Court business interruption ruling – but insurance experts are concerned that fees could be as much as 40% of any damages.

Last Friday the court ruled that some policyholders are entitled to pay outs, dismissing insurer appeals in a landmark test case brought by the Financial Conduct authority.

This means that a portion of the 370,000 businesses estimated to have a stake in the case are entitled to claim for Covid-related losses under their BI cover.

The case is expected to act as a guideline for up to 60 insurers, with claimants expected to be contacted by their insurance provider in the event their policy should pay out.

Since the judgment was handed down, policyholders have reported an increase in approaches by claims management companies and no-win-no-fee solicitors firms.

Firms, some regulated by the FCA or Solicitors Regulation Authority, are looking to charge fees of up to 40% to pursue BI claims on behalf of policyholders.

Businesses told Post they have seen targeted online marketing, received cold calls and email campaigns, and in more than one instance it was alleged that private Facebook groups have been “infiltrated” by spammers posing as policyholders.

Going for broker

Insurers recommended that if policyholders need help with the next steps they should contact their broker.

Aviva claims director Andrew Morrish said: “[If businesses] need help with their claim, we recommend that they contact their broker for assistance. They will be best-placed to support businesses’ claims and also ensure that they keep 100% of the payment. If an insurer does not properly resolve a claim or complaint, small businesses can go to the Financial Ombudsman Service for a free and impartial dispute resolution service.”

While the Supreme Court judgment means some insurers will have to pay out to some businesses, questions do remain over quantifying and proving losses.

It is also untested whether businesses may be able to claim extra damages under the Enterprise Act (2002).

Facebook targeting

Daniel Duckett, member of the Hiscox Action Group and director of Belfast-based Lazy Claire Patisserie, is one such policyholder who has flagged unusual activity on private Facebook groups. As early as Monday a recent member began posting on the group, alleging to have received their settlement and had used a law firm to claim double what they had initially expected.

He and others on the group were instantly suspicious of the post, Duckett said. The user has since been expunged from the group as moderators did not want to risk others “being misled”.

Duckett told Post: “It’s not surprising but it’s frustrating because if anybody has a valid claim they’re not going to need loads of solicitors advice. And these solicitors know that if someone has a valid claim, it’s pretty much a slam dunk, so they’re going to get a fee.”

It is understood Hiscox began paying claims on Tuesday.

A spokesperson for the insurer said: “We have begun paying claims and are committed to doing so as quickly as possible.”

The Hiscox spokesperson advised claimants to contact the insurer directly on its dedicated coronavirus claims email address or phoneline.

Commission cuts

MGA Associates, an FCA regulated CMC, advertises that it is seeking a 36% cut of any damages.

Its website cautions: “Some insurers are trying to contact businesses directly to reach settlements, but this could result in a much lower pay–out than they are entitled to.”

My Business Solicitor, an SRA regulated firm, advertises fees of up to 30%.

And policyholders have alleged some other firms have quoted fees of up to 40%. None of the above firms responded to a request to comment from Post.

Under the Legal Aid, Sentencing and Punishment of Offenders Act (2012) reforms, which followed the Jackson Review, if claimants take out conditional fee agreements (‘no win no fee’ agreements) or after-the-event insurance policies these must be paid back from their own damages if they win. These costs cannot be recovered from the opponent.

The Laspo rules are slightly different for personal injury claims, for which lawyers’ CFA success fees are limited to 25% of damages awarded.

Caution advised

Insurance claims professionals have cautioned businesses against signing up for such services, with much detail surrounding the case yet to be ironed out by the regulator. So far as insurers are concerned, there is not yet any need for third party involvement.

According to Aviva claims director Andrew Morrish: “Insurers will pay customers the same for business interruption claims regardless of whether a lawyer or CMC is involved – the only difference is that the customer has to pay to use their services, and ends up much worse off as a result.”   

“Businesses didn’t wait for the Supreme Court ruling to find if their policy provides cover, only for them to give up to 40% of their business interruption money away,” he continued.

The Aviva claims boss recommended insureds should first go to their broker for help with any claim, with the Financial Ombudsman Service the next port of call.

Morrish added: “It remains the case that most business interruption policies do not provide cover for a pandemic, and as such, most insurers will have written to customers to let them know if their policy was subject to the test case. If a policy was determined as not in scope for the test case, the Supreme Court ruling will not change this.

“So promises by some CMCs about bumper payouts for small businesses are creating a false hope and are cruelly misleading. We believe the regulator should monitor for cases where CMCs are making false or misleading statements to businesses who may be tempted by bogus offers of increased pay outs. The law on this is now clear, and there is no need for third parties to enter into the claims process.”

CMC skepticism

CMCs do not appear to share Morrish’s confidence that insurers will pay up and play fair.

Return My Money, a trading name of FCA regulated Pinpoint (Call Solutions), geared up to work on BI claims back in April, launching in October. Its fees, at 18% including tax, were the lowest seen by Post.

According to Return My Money director Chris Hopson:  “Despite the Supreme Court ruling the position for most businesses remains far from clear. Many still need help to establish and present their claim and there are also numerous cases where Brokers have provided incorrect or misleading advice. We assist businesses with all of this and also help them quantify and present their claim. 

“The majority of businesses simply don’t have a claim and sometimes we find that even when they do, they don’t have a significant loss or even any loss as small businesses adapted well to the circumstances they were in.  This is far from straight forward and simply isn’t the saviour for small businesses that the media has portrayed.”

“It remains a significant risk that claims won’t pay out for one or more, of very many technical reasons but when a claim is accepted there is then a huge amount of work to establish the quantum of that claim which itself could be limited both by value and time as indemnity periods run out,” Hopson said.

Hopson said he hopes to benefit from “word of mouth” and keep costs “as low as possible”.

Clone risk

While many claims firms do operate legitimately, when the opportunity to make money rolls around there will always be people looking to con unwary consumers.

In the case of BI, CMCs and solicitors themselves are already having to contest with clone firms.

For example, a Facebook page called ‘R & D Consultancy’, which alleges it is affiliated with Areande (a company connected to My Business Solicitor), has been advertising for claimants.

An often easy giveaway, the Facebook page urged policyholders to get in touch with its Outlook email address.

The owner of the Facebook page, which Post has reported to the regulator, did not respond to requests for comment and it is not registered with the FCA. Areande confirmed the page did not belong to it.

New blood

As regulated firms have pounced on recent publicity to drum up more business, new entrants have also appeared on the scene. BI is drawing new blood into claims management.

Covid Claims Limited sprung up on 5 January 2021.

Business Interruption Claims Ltd was incorporated on Companies House on 18 January 2021, three days after the Supreme Court judgment. When contacted by Post via the website that advertised itself as the business’s for details on its regulatory status, the firm maintained it had this week begun the process of winding up as well as winding up its home claims business, citing lack of demand. Its affiliated Facebook page, which has since been removed along with its website, was advertising for BI clients on Friday.

The company had been “testing the water” for BI claims with home claims also having “dived”, Post was told.

Interruption Claims UK was set up in November last year. Director Kieran Johnson said the firm is not yet registered with the regulator and has not started trading, though its website is live. The call from Post was his first, Johnson said.

Asked why he was moving into the claims space, he said “I’m just trying my hand at it, to see what it’s like.”

“A lot of [claims] companies are already out there,” Johnson added. “And a lot of companies last year refused to pay out until it came through the Supreme Court, so they’re the ones who will be busy now. And I’ll probably be busy in a couple of months’ time.”

As to how his company intends to help clients when insurers are meant to be contacting them directly, Johnson said: “I’m sure there’s insurance companies out there that won’t [pay out]. They’ll drag their feet and stuff like that, where we need to get the economy going.”

Johnson maintained he intends to put an application in to register with the FCA next week.

Cashing in?

Industry insiders and consumer champions expressed dismay when presented with fee findings and accounts of CMC behaviour.

Ian Hughes, Consumer Intelligence CEO, said: “This case seems to have brought out both the best and the worst in claims management and class action.  It is amazing that the HAG (and others) have pulled together a class action and achieved the action it has. Clearly there have been costs in pulling the claim together and there was a risk the action might fail. 


While some had predicted an influx of BI CMCs early last year, this has been slower to materialise.

A number of firms set up in the first half of last year – including Covid-19 Claims Ltd and Business Interruption Solutions (which is registered at the same address as Business Interruption Claims Ltd) – do not appear to have active websites and are not on the FCA register.

Coronavirus Claims Limited and Coronavirus Compensation Limited both remain up for sale online, valued at £1618.75 each.

“But it is horrific that others are now jumping on the band-wagon, charging outlandish fees without taking any of the risk.”

Some claims professionals have been concerned by what they see as the risk of people trying to cash in on the litigation for some time.

Donna Scully, director of Carpenters Group, which works with both claimants and insurers, said back in June she had raised concerns that “centred around unscrupulous people just out to make money out of big litigation on a no win no fee basis backed by litigation funding so no real exposure or risk”.

“I’d seen at that stage quite aggressive advertising for policyholders who want to make these claims.  Some claims farmers, lawyers and barristers were keen to get as many people on board as possible with almost no real regard for how strong their case was.  I did also see that CFA deductions of up to 40% would be made from the successful client’s damages recovered which is excessive,” Scully explained.

Scully harked back to PPI claims, which she described as a “scourge in terms of bad claims farmers and aggressive marketing”.

She added: “I am not surprised to hear that the above is being ramped up now that the claimants have been successful because it will look even more lucrative.  Again, deductions of anything like 40%, especially now the claimants have been successful appear over the top and excessive and innocent businesses may not realise what is happening.”

For now, businesses will want to keep that old saying in mind: ‘if it seems too good to be true, it probably is’. And that other old saying, which some insurers have lately been taught a valuable lesson on: ‘always check the T&Cs’.

What the regulators say on fees

Solicitors Regulation Authority

The fees solicitors can charge are governed by judicial process, meaning they are set down by the government.

Business interruption claims do not have a set fee limit, unlike payment protection insurance.

In an August 2018 warning to firms on PPI, the regulator noted: “Although legislation sets a fee cap of 20%, this does not allow for all clients to be charged at this rate. Our view is that, any fees charged that are greater than 15% of a client’s damages are unreasonable, unless the work involved and the risk to the firm clearly demands a greater percentage of the damages.”

In a November 2019 paper, the SRA set out that firms should not engage in “predatory litigation”. Costs should be proportionate to work being carried out, particularly where there are existing compensation schemes.

Clients should always be made aware in advance of any costs they may have to pay.

Financial Conduct Authority

The FCA took on regulation of certain CMCs in April 2019.

With the exception of payment protection insurance, which has a 20% cap, there are no set fee limits in place that govern what regulated CMCs can charge.

In a letter to CMC CEOs in November, the regulator flagged unclear fee structures as one of seven key “drivers of harm” it intends to remedy in the sector.

FCA guidelines set out that CMCs must:

  • provide claimants with a summary of key information before taking them on
  • supply a detailed breakdown of how they will charge claimants
  • offer a 14-day cooling off period
  • keep claimants updated on key aspects of their claim
  • clearly inform claimants about ombudsman schemes or any other official ways they can claim
  • clearly explain how to complain if claimants are unhappy with their service

They must not:

  • send emails or texts to anyone who has not agreed to receive them
  • make marketing calls without specific consent 
  • approach potential claimants in person
  • use any form of high-pressure selling such as asking for on-the-spot decisions


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