Many of the businesses caught up in February's Camden fire lost business not because of damage to their stalls or shops but because it was impossible to access their premises for several days. However, as Marcus Alcock reports, this loss could have been avoided
Underinsurance is often a spectre that only rears its head in the aftermath of a disaster, and this was very much the case for those market traders who faced days of interrupted business following 9 February's fire in Camden market.
As Angus Tucker, Grant Thornton's director of insurance claims solutions, pointed out at the time: although the market owners themselves are likely to have been covered for physical damage and consequential financial loss under their business interruption policies, those business simply denied access to their premises because the area was cordoned off by police will not have been so fortunate (Postonline, 11 February 2008).
Technically, there is no reason why the insurance market could not have catered for many of the businesses affected by the fire because 'denial of access' cover is a widely offered extension to standard BI policies. Yet the fact remains that it is still a niche product, with confusion over wordings and the age-old problem of expense hampering its development.
A growing problem
However, it would appear that claims connected with denial of access cover are becoming more frequent as a result of society generally becoming more health and safety conscious, according to David Townsend, loss adjuster at Crawford and Company.
"There were times when, if you had a fire in a department store for example, the police would cordon off the end of the street, then the borough engineer would come in and cordon off the building and say that was enough," he says. "Now it's much more complicated. You can end up with your access being denied to a perfectly undamaged building whereas, in days gone by, people just got on with it. So the frequency of cover being called into effect is increasing because of a change with regard to public safety. Awareness has been heightened and cordons tend to stay in place longer."
Mr Townsend explains that one of the problems with this cover is that there are two types of policy - 'access denied or hindered by event' or 'access denied by statutory authority'.
The fact that these cover quite different things is a point picked up by Damian Glynn, partner at loss adjuster Teceris, who elaborates on the potential confusion caused by disparate wordings between policies: "The actions of a local authority are not standard denial of access cover, although you can extend cover to include such actions or those of the police.
"The standard policy specifies 'damage to a property in the vicinity that hinders or denies access'. But this is a physical hindrance, so a disinclination to travel doesn't count." And some policies, he continues, use phrases such as 'at or near premises', instead of material damage provision.
"In short," says Mr Glynn, "a variety of wordings have been devised in an attempt to help the policyholder." But if this variation has ultimately increased confusion over what is and is not covered, does this issue need to be revisited? "Maybe it is time to look again," he concedes.
Another issue, according to Mr Townsend, is that business can still be affected by a cordon even if they are outside it. "The cases we have tended to see are connected with bomb claims and, to a certain extent, flooding where the local authority or police decide to bring in security cordons," he comments. "But such cordons raise interesting issues; as things improve they tend to move them further back so the extent of denied access decreases day by day. But that doesn't mean businesses that find themselves outside the cordoned-off area fare any better than those that remain inside. So, in my view, the problem for business is 'loss of attraction'."
"Loss of attraction is a big issue in that it's not often picked up by insurance," says Terri Adams, chartered accountant at Cunningham Lindsey's Special Adjusting Network. "Look at the Camden fire: the publicity suggested it had devastated the entire area but, in actuality, only a fifth of the market was affected. However, that meant many people who could have gone there to shop, didn't. And those that did turn up were only there to gawp at the fire's after-effects."
Ms Adams says the problem lies in loss of attraction being a very specific extension, and a much more expensive option. So, although large retail sites may consider buying it "because their business is often generated off the back of something else", smaller businesses - like the traders at Camden Lock market - will probably not have this cover.
Yet extensions and exclusions are not a problem everywhere, it seems. Alan Just, a consultant for insurer Amlin, says that "denial of access is one of those products we tend to include in our standard cover".
Although he does add that Amlin's cover is designed more for retail shops. "For 30 years I was a broker and there's hardly anyone out there offering this; it's certainly very unusual to offer it up to the sum insured."
Whether standard or not - and for most insurers denial of access remains very much an add-on cover - at least this area is reasonably simple in terms of assessing claims, as business interruption is one of the few policies that specifies the precise formula on which you can calculate the claim.
Mr Just concludes: "Like any loss, it's down to the insured to prove it - but the bottom line is, if they can't trade, miss a day's trading and can prove their loss, then it's reasonably straightforward."
Thankfully, the February fire only damaged a small area known as Canal Street market. According to Camden Council, 35 stalls in total were damaged and 55 stalls were left unscathed. The total bill for repairing the damaged buildings, including the infamous celebrity-friendly pub The Hawley Arms - which is to be rebuilt - has been estimated at £20m.
The cost to insurers in terms of business interruption insurance and specific denial of access cover is expected to be minimal, however, as most market traders, estimated to take up to £3000 every Sunday, are not thought to be insured. Instead they are looking to the market's owners, Camden Market Holdings and Centa Business Services, for compensation. If they had been insured, the insurance bill could have been in the region of £330,000 for the 55 undamaged stalls alone, based on the area being cordoned off by the police for four days after the fire.
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