Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Butlin’s is suing insurers led by Aviva over a £60mn bill from a flood that shut down its largest holiday resort in a dispute over whether heavy rainfall constituted a “storm”.
The family-owned UK company has brought a legal claim in London’s High Court after its insurers sought to limit the amount of cover they would provide for extensive damage arising from a deluge at the Minehead camp in Somerset.
The legal battle between one of Britain’s best-known leisure operators and London-listed Aviva is a sign of the mounting challenges facing insurers and their customers as climate change increases the frequency and severity of extreme weather events.
England has experienced its wettest 18 months since records began in 1836, and home insurers suffered record weather damage of £573mn last year.
Jon Hendry Pickup, chief executive of Butlin’s, told the Financial Times he was “disappointed” at how insurers handled the insurance claim following the incident last September.
A group of insurers led by Aviva, the holiday group’s lead underwriter, have told Butlin’s that because the damage fell within the category of a “storm” only up to £25mn of the damage would be covered, according to a lawsuit that the company filed last week. The £25mn has been paid.
However, Butlin’s said the Met Office had not declared a “named storm” when the flooding occurred and that the rainfall was not accompanied by high wind.
“As a matter of ordinary English” and as “a matter of law, a “storm” occurs only where there is high wind,” Butlin’s said in its legal claim.
Aviva, which has yet to file its defence, said it was not yet in a position to comment on the proceedings. The company does not agree that the legal definition of a storm requires high wind, based on previous rulings, according to a person familiar with its position.
Butlin’s, founded in 1936 by Sir Billy Butlin, said it has racked up a bill of £60mn from the incident — a sizeable proportion of its £350mn annual revenues.
This includes the cost of repairs as well as lost revenues. Pickup said the company had to deal with “tens of thousands of cancellations” and give discounts on replacement stays.
The resort in Minehead, one of three Butlin’s sites alongside Bognor Regis and Skegness, had to close for most of January for refurbishment, and only became fully operational again last week.
“We’ve never seen or dealt with anything like that,” Pickup said of the severity of the weather. Experts had told him this was “way outside the range of what [they] would normally deal with”.
He said the company was investing to improve its weather defences following the incident.
Butlin’s, once famed for its quirky British seaside holiday traditions such as knobbly knees competitions, was sold in 2022 by Blackstone to one of the founding families of Bourne Leisure, Butlin’s parent company.
An industry-wide reinsurance scheme known as Flood Re provides coverage for residential properties, but this has not been extended to businesses despite repeated calls from the insurance sector since its launch in 2016.
READ SOURCE
