Legal bid to save British Steel with disputed £30m insurance claim usurped by insolvency

A last ditch attempt by British Steel to claim a disputed £30 million in insurance from Zurich Insurance and Liberty Insurance to potentially save the firm from insolvency has failed as Intelligent Insurer went to press.

British Steel announced it will enter insolvency, directly threatening 5,000 jobs at the plant and indirectly threatening 20,000 jobs in its related supply chain.

Before the confirmation of insolvency, Mactavish, a UK insurance governance expert, was representing British Steel in a dispute with Zurich Insurance and other insurers including Liberty over a £30 million insurance claim that has been unresolved for two years. Mactavish had said that if settled, the claim could help save the company and staff jobs.

However, emergency talks with the government and administrators failed to reach a positive outcome, leaving the bid in limbo.

British Steel had sought further damages from the insurers to compensate for their slow response and incomplete investigation of the claim.

The claim centred on an incident in June 2017 which damaged a blast furnace at its Scunthorpe premises. This meant the furnace had to be shut down for safety.

Operations did not restart for several weeks and the insurers’ investigation took nine months, before the claim was rejected in May 2018.

Mactavish reviewed the investigation into the incident and found what it believed to be “major deficiencies” and said the insurers should settle the claim in full. Its findings are based on the views of leading technical specialists, forensic accountants and insurance lawyers.

Bruce Hepburn, chief executive officer at Mactavish, said: “From our review, we feel that Zurich and Liberty’s investigation was incomplete and wrong. It did not interview many of the relevant staff or even identify the blast furnace blowout as the key cause of the claim, which we believe categorically establishes cover under the terms and conditions of the policy.”

Hepburn added that settlement of this claim would have made a major contribution to securing the survival of this British institution. He said the claim should have been settled “long before administration was looming” and that Zurich and Liberty had had the latest data pack addressing their questions for over two months now, which was “more than long enough” and could have proved to be the “decisive factor” in forcing British Steel under.

A spokesperson from Zurich said: “We are currently in the process of working with British Steel to progress a complex property claim. We are reviewing all the evidence related to this claim, including additional information that has only recently been provided, and remain focused on resolving it as quickly as possible.”

In response to the claim from Mactavish on behalf of British Steel, Liberty Specialty Markets said: “We are working closely with British Steel to review a property claim in the light of further information recently provided by management. We look forward to resolving this matter promptly.”

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