I feel bad for your friend, but it’s not true that insurance wouldn’t pay out for flooding because it’s an ‘act of god’. That’s a myth. Flooding cover (and business interruption cover for the loss of income as a result of an insured event) is covered as standard in business protection policies.

What I think must have happened is that when your friend was arranging the insurance he did not provide accurate information about the material circumstances (i.e. the facts), such as the history of flooding at the premises. That was I’m sure a genuine oversight. However, the insurer can say that they would not have agreed to ever cover flooding if their questions had been answered correctly, and therefore they can legitimately refuse cover.

Any policyholder can challenge their insurer’s decision and when they have a final decision they can refer to the Financial Ombudsman Service within six months.