Good news for small businesses who may now benefit from insurance pay-outs

Posted on 27th January 2021 by Streets

Image to represent Good news for small businesses who may now benefit from insurance pay-outs

Small businesses have won Covid-19 Insurance Payouts after the Supreme Court victory and this may now provide relief for many with uncertainty of the position on their Insurance Policies.

Hundreds of thousands of small businesses have been forced to close during the Covid-19 Pandemic and after the first lockdown it was apparent that there was uncertainty over insurance policies paying out.

Many businesses who made claims on their insurance found providers disputed liability. Claims had been made focused on infectious or notifiable diseases, non-damage denial of access and public authority closures or restrictions.

The Financial Conduct Authority (FCA) put together a test case using representative sample policy wordings issued by eight insurers, aimed at clarifying key issues of contractual uncertainty for an estimated 370,000 policyholders holding 700 types of policies issued by 60 insurers.

Whilst the issue went in front of the High Court’s judgement in September 2020 there was still not complete agreement between insurers and the regulators. Therefore, the FCA made an appeal to the Supreme Court with its test case.

The Supreme Court provided a final ruling on several issues, and among them found that most of the ‘disease’ and ‘prevention of access’ clauses in the sample policies, provide cover in the circumstances of a pandemic.

On the FCA’s appeal the Supreme Court ruled that cover may be available for partial closure of premises as well as full closure, and for mandatory closure orders that were not legally binding; that valid claims should not be reduced because the loss would have resulted in any event from the pandemic. This will mean more policyholders will have valid claims and some pay-outs will be higher.

Although there are likely to be nuances in the detail, the judgement rejects many of the insurers previous arguments for declining payouts.

This is clearly great news for all of those businesses who may now benefit from a pay-out.

What should you do?

If you had previously approached your Insurance provider and were faced with a dispute over receiving a payout, in light of the FCA’s successful challenge, we would recommend that you get back in touch with your Insurance Provider to understand how the Supreme Courts new ruling impacts you and if it results in a more positive outcome for you.

We are here to support our clients who are making claims and where the Insurance Provider requires the loss of revenue to be quantified, we are able to use past accounting records and forecasts to prepare calculations to help arrive at this figure.

No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.


The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.

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