A recent Supreme Court ruling has given hope to small and medium-sized business over some Covid-19 insurance claims.

The UK Supreme Court has allowed an appeal by the Financial Conduct Authority, on behalf of business interruption insurance policyholders, which provides greater clarity for both policyholders and their insurers regarding the validity of Covid-19 insurance claims.

Business Interruption ‘Disease’ and ‘Prevention of Access’ Insurance Clauses

Most insurance policies for small/ medium-sized business only have basic cover for business interruption as a consequence of property damage but some policies cover business interruption from other causes, in particular diseases, prevention of access and public authority closures or restrictions.

The Financial Conduct Authority’s test case was based on a representative sample of policies issued by eight insurers that contained ‘disease’ and ‘prevention of access’ business interruption clauses or similar hybrids. The insurers involved in the FCA test case were:

• Arch Insurance
• Argenta Syndicate Management
• Ecclesiastical Insurance Office
• Hiscox Insurance
• MS Amlin Underwriting
• Royal & Sun Alliance Insurance
• Zurich Insurance

What the Supreme Court insurance ruling means for businesses

Policyholders who have insurance policies worded in a similar way to the policies above may also have valid claims against their insurers if they suffered a business interruption loss resulting from the Covid-19 pandemic.

Laura Colebrook, Dispute Resolution solicitor at TH Solicitors explains, “The Supreme Court confirmed that some policyholders who have insurance policies that contain ‘disease clauses’ and certain ‘prevention of access’ clauses should be able to claim from their insurers. They have also provided greater clarity as to how losses should be assessed and calculated. However, each policy will still need to be considered on its own terms against the detailed facts of each case.”

The judgment means that more policyholders who were ordered to close business premises during the first national lockdown in response to the Covid-19 pandemic will be able to make valid claims to their insurers and that some previous pay-outs in respect of valid claims may be higher.

Of particular note was that the Supreme Court ruled that insurance cover may be available for partial, as well as full, closure of premises and for closures that happened ahead of legally binding instructions given by the government. It also ruled that valid claims should not be reduced because the loss would have resulted in any event from the pandemic economic downturn.

This will have huge implications for people who were previously told their policies did not cover Covid-19, from landlords looking to claim lost rent or retailers who lost income because of the mandatory Covid-19 closure of their premises.

How we can help

It is estimated that there may be over 370,000 policyholders who can now make valid claims worth at least £1.2bn following the results of the FCA test case. Those who have not already notified their insurers of claims should check their policies without haste, especially as some policies contain time-sensitive provisions which might result in an otherwise valid claim being declined by insurers.

THP Solicitors are experienced in reviewing insurance policy documentation, dealing with valid insurance claims, negotiating settlement offers from insurers and challenging disputed insurers’ decisions. Contact Laura Colebrook in our Dispute Resolution team to see if you have a valid claim by telephoning 0118 975 6622 who will be happy to assist you.