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.
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