Broad Street music venue wins insurance test case

Six-figure payout expected after landmark Covid-19 ruling.

A music bar and nightclub in Birmingham is celebrating after winning a landmark legal battle to receive a huge insurance pay-out for losses caused by the first COVID-19 lockdown.

The Velvet Music Rooms & Sugar Suite club on Broad Street, in the Westside entertainment district of the city, is among the beneficiaries of a Supreme Court ruling which found in favour of small firms receiving payments from business interruption insurance policies.

The Financial Conduct Authority brought the test case on behalf of the policyholders of eight insurance companies including QBE, which Velvet Music Rooms is insured with.

Delighted owner, Dani Hadley, who runs the family-owned bar and club with her sister Eilis Collins, explained that the court ruling meant the business “should receive a six-figure sum”.

Ms Hadley said: “The future is guaranteed now. It’s a real safety net for the business. We can now pay our bills and build up our reserves.”

She said the business interruption insurance has been taken out when the Velvet Music Rooms first opened in 2005.

“When we were forced to close at the start of the first lockdown last March we had a very positive phone call from our broker saying we were really lucky, we were one of the few to be able to get something from our policy. So, we thought we were covered for the loss of business, but then the insurance company decided to put up a fight.”

After losing the first round of the legal fight at the High Court, the test case was fast-tracked to the Supreme Court – the highest court in England.

Ms Hadley said: “There were a lot of us up and down the country hoping the verdict was going to be before Christmas, because hospitality has been absolutely at the bottom of the ladder.

“We’ve been knocked back several times through this process, but that’s now it, there is no other process to go through.”

She told how the business had been forced to furlough staff and to take out a Coronavirus Business Interruption Loan to get through the pandemic.

“The only way to get through this was to take on more debt. All through this we have had this insurance policy that wasn’t paying out. It was a real frustration, a real fly in the ointment. We were really wound up by that. It’s what insurance is for.”

The Velvet Music Rooms was able to re-open on 10 July after the first lockdown, but the new tier system meant it closed again on 4th November and has remained shut ever since.

Ms Hadley said: “We have been on a real rollercoaster. We’ve spent the last few months feeling very gloomy about the outcome, but our brokers and the FCA have been really fantastic.

“Basically, we now know we are covered 100 per cent. Now it’s just a question of waiting for the latest lockdown to end so we can re-open.”

She added that insurance brokers including her own were now seeking interim payments while the full settlement process is agreed.

The court ruling could result in tens of thousands of businesses receiving pay-outs which could end up totalling hundreds of millions of pounds across the UK.

Huw Evans, director general of the Association of British Insurers, said: “All valid claims will be settled as soon as possible and in many cases the process of settling claims has begun.”

The Australian-based QBE group declined to comment specifically on Velvet Music Rooms’ pay-out. But UK spokesperson Sandra Villanueva referred Westside BID to its release on the Australian Securities Exchange.

Part of this said: “While the gross cost of UK insurance business interruption claims will increase as a result of the ruling, the net cost remains unchanged at $70 million (Australian dollars) and was allowed for in the Group’s revised result expectations announced on 18th December 2020.”