Tens of thousands of small firms will receive payments from insurance companies for coronavirus-related business interruption losses, following a ruling by the UK's Supreme Court today.
This comes after a test case was brought forward by the Financial Conduct Authority (FCA) last September to clarify the scope of business interruption claims, with some insurers having disputed their liability.
Today's ruling means that cover may be available for partial or full closure of premises, and for mandatory closure orders that were not legally binding. Valid claims should not be reduced because the loss would have resulted in any event from the pandemic.
The insurance industry now expects to pay out over £1.8bn in COVID-19-related claims across a range of products, including business interruption policies.
“Tens of thousands of small firms and potentially hundreds of thousands of jobs are relying on this,” said Sheldon Mills, executive director for consumers and competition at the FCA.
“Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. We are grateful to the Supreme Court for delivering the judgment quickly. The speed with which it was reached reflects well on all parties.”
The FCA said that 370,000 policyholders have been identified as holding 700 types of policies issued by 60 insurers that may be affected by the outcome of this case.
The High Court’s judgment last September resolved most key liability issues. However, six insurers made 'leapfrog' appeals to the Supreme Court, without going to the Court of Appeal first.
These appeals have been dismissed today, bringing an end to legal arguments under 14 types of policy issued by the insurers, and a substantial number of similar policies in the wider market.
“We recognise this has been a particularly difficult time for many small businesses and naturally regret the COVID-19 restrictions have led to disputes with some customers,” said Huw Evans, director general of the Association of British Insurers.
“Insurers have supported this fast-track legal process every step of the way and we welcome the clarity that the judgment will bring to a number of complex issues. Today’s judgment represents the final step in the appeal process.”
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Author: Chris Seekings