The Supreme Court has today found (in a fast-tracked appeal of the earlier High Court judgment) in favour of small firms receiving payments from business interruption insurance policies, meaning tens of thousands of businesses should now receive payments in relation to some of the losses incurred as a result of the first lockdown.
This ruling, which was handed down following an appeal from six of the largest commercial insurers, reinforces the earlier High Court judgment in an expedited test case, which examined whether a selection of business interruption (BI) insurance policies provide cover in relation to COVID-19 (in the absence of specific wording purporting to cover the coronavirus pandemic). The Supreme Court found in favour of the policyholders on the majority of the key issues, which we outlined in an earlier article.
That case was originally brought by the Financial Conduct Authority (FCA) on behalf of policyholders, in order to provide some clarity and certainty in relation to the extent of cover available, based on some of the most commonly used policy terms and conditions. It was against eight defendants – insurers who had agreed to be part of the test case – and considered 21 sample wordings from these insurers’ policies.
Although the High Court found in favour of the majority of the policyholders, it left some issues unresolved and led to an appeal by dissatisfied insurers. This ruling from the Supreme Court provides guidance for a wider pool of 700 policies, potentially affecting 370,000 policyholders and it is estimated that affected businesses are now going to receive pay-outs in excess of £1 billion.
Lord Briggs, who was one of the judges sitting in the Supreme Court, explained that “This was not, of course, a disease which anyone could have had specifically in mind when the policies in issue were written and marketed. But it is clear from the use of the definition of a ‘notifiable disease’ in most of the relevant clauses, and equivalent wording in the remainder, that Covid-19 [when it appeared] fell squarely within the types of disease for which all the relevant disease and hybrid clauses provided cover.”
Whilst sadly some businesses have ceased trading as a result of the pandemic, for those who were before clinging on by the skin of their teeth, it seems that the Supreme Court has confirmed that there is indeed a lifeline.
Although this is welcome confirmation in relation to insurance policies which were obtained prior to the pandemic, it is likely that insurers will have revised (or indeed will now revise) their insurance policies to expressly provide, or exclude, insurance cover on these grounds. It is recommended that policyholders carefully check the wording of both new and pre-existing insurance contracts.
If COVID-19 has had an impact on you or your business and you would like to seek advice on the possible rights available under your BI insurance policy, please speak to one of our expert team.