Business Interruption Insurance – The Latest News

The Supreme Court has now ruled on a test case brought by the Financial Conduct Authority on whether or not companies who bought business interruption insurance could claim for losses brought about by the coronavirus.

Clover Insurance, who supply business insurance for firms in Harlow, Cheshunt and throughout Hertfordshire and North London, look at the fine print of the ruling and what it will mean going forward.

The Background

The FCA brought the case on behalf of policyholders, many of which were small and medium sized businesses. They thought they should be able to claim under the terms of their business interruption policies, but insurers were refusing to pay out, arguing that the only the most specific or specialist policies were intended to cover the unprecedented situation brought about by the pandemic.

Photo: By Andy Mabbett/Wikimedia Commons. Own work, CC BY-SA 4.0

Business Interruption Insurance – The Latest News

Eight of the largest insurance companies agreed to take part in the case as they were keen to discover the legal position as well. Initially the case went to the High Court but subsequently went to the Supreme Court on appeal.

The policies which the courts considered fell into three categories:

  • Those policies which had disease wordings – an outbreak of a notifiable disease within a certain radius of the policyholder’s business.
  • Those which had a prevention of access wording – which meant that businesses were not allowed to open by order of either the government or the local authority. This started being an issue from March 20 last year when some types of businesses were ordered to shut at the start of the UK’s initial lockdown.
  • The final clauses which were looked at were hybrid wordings – a mix of the two categories listed above.

The Conclusions

The Supreme Court decided that most business interruption policies containing either a disease or a prevention of access clause were valid reasons for making a claim, although it depended on the specific wording of the individual policy.

The court’s ruling also means that insurers will also have to pay out if the business only suffered a partial closure; and the argument (made by some of the insurers) that the policyholder would have suffered losses anyway because of the pandemic was also found to be invalid.

However, standard policies – many of which focus on a business’s closure as a result of property damage – are not expected to be covered.

What This Means in the Future

Some insurers have already started paying out following the ruling. The official judgment, which will be used to help settle any disputes, will be set down in a series of declarations by the Supreme Court. Meanwhile the FCA is working to provide a series of Q and A’s for customers, advising them of which types of policy wordings will cover them in the event of any similar issues in the future.

Policies for any new and renewing customers are generally expected to take account of the ruling, so losses from the latest lockdown measures in different parts of the UK should be clearly stated as part of the cover – and if they aren’t, then the wording should make this clear.

Business Insurance from Clover Insurance

When it comes to business insurance, it’s best to leave it to the experts like Clover Insurance. We help our customers find the business insurance policy which is right for them, whether they are based in Harlow, St Albans, Cheshunt, or across Hertfordshire and North London.

It’s not just business interruption insurance company owners need to think about, but also other elements such as employer and public liability insurance, stock insurance, and computer breakdown insurance.

If you would like to know more about our services – and we also offer many different types of motoring and property-related policies – then call us on 020 8805 1121
or 01992 630095 or follow this link.