The ongoing COVID-19 pandemic has wreaked havoc on businesses across the globe. However, the Supreme Court judgment released on Friday 15 January may provide many struggling UK businesses with the lifeline they so desperately need.
Many businesses who have suffered substantial losses due to COVID-19 have tried to claim under their business interruption insurance policies, only to be told their insurers were refusing to pay out.
The Financial Conduct Authority (FCA) decided to bring a test case to resolve the lack of clarity and confusion many businesses were facing while attempting to claim under their policies.
Now the courts have ruled in favour of the FCA, even after insurance companies appealed, which means that thousands of businesses that had claims turned down could now be eligible to recover their losses via their business interruption insurance after all. Some may even be entitled to more than they originally applied for.
How the FCA turned things around
The FCA’s test case involved 21 policy wordings from 8 different insurers, but it had the potential to affect 700 types of policies, across 60 insurers, and over 370,000 policy holders.
The case was heard in the High Court back in September 2020. The High Court ruled substantially in favour of the FCA and the 370,000 potential affected policy holders. However, the insurers subsequently decided to appeal the case to the Supreme Court.
Why businesses could claim for more than before
On Friday 15 January the Supreme Court released its judgment which substantially upheld the judgment of the High Court and dismissed the appeals of the insurers.
The ruling supported the High Court’s judgment that out of the 21 sample policy wordings most, but not all, provided cover. The Supreme Court also extended the judgment to cover mandatory closure orders that were not legally binding on businesses, meaning even more businesses may be able to claim.
The judgment also allowed the FCA’s appeal that claims should not be reduced even though businesses would have suffered similar loss due to the pandemic regardless of whether they were forced to close or not. This means that successful claims are likely to be for an even higher amount than before, so this is even more good news for businesses.
This case is a landmark victory for UK businesses and may mean that insurance may have to pay out to the over 370,000 UK businesses that may be affected by this judgement.
The COVID-19 pandemic has had an unprecedented impact on businesses and this judgment is the potential lifeline that businesses across the North East and throughout the UK have been hoping for.
The judgment provides guidance on which claims are covered which will hopefully make it easier for business owners to claim under their polices and reduce the number of disputes. By allowing the FCA’s appeal this judgment also means that more businesses will be covered, and some pay-outs will be higher.
However, despite the overwhelming positivity of this judgment for UK businesses, claims will still need to be assessed on a case by case basis.
Business owners who think they may have a claim or have had their previous claims turned down should seek professional legal advice.