COVID-19: Supreme Court backs small firms over business interruption insurance claims

Small firms are cheering a Supreme Court ruling that appears set to force insurers to pay out on disputed coronavirus business interruption claims worth at least £1.2bn.

Judges were asked to set the parameters for valid claims from various policies following a test case brought by the Financial Conduct Authority (FCA) with the support of eight insurance companies last summer.

The High Court judgment, handed down in September, was widely seen as supportive for the bulk of the estimated 370,000 companies said to be affected by the dispute but prompted appeals by both sides.

A broad range of firms including pubs, cafes, wedding planners and beauty parlours argued they faced ruin when they were turned down by insurers for business interruption policy claims on losses caused by the first national COVID-19 lockdown.

Six of the world’s largest commercial insurers Hiscox, RSA, QBE, Argenta, Arch and MS Amlin, told the Supreme Court in their appeal that many business interruption policies did not cover widespread disruption.

The legal process was fast-tracked to the highest court in England and Wales which rejected the insurers’ arguments and said it had “substantially allowed” the appeal brought by the FCA and an action group to clarify the position.

One of the judges, Lord Briggs, said in the ruling: “On the insurers’ case, the cover apparently provided for business interruption caused by the effects of a national pandemic type of notifiable disease was in reality illusory, just when it might have been supposed to have been most needed by policyholders.

“That outcome seemed to me to be clearly contrary to the spirit and intent of the relevant provisions of the policies in issue.”

The Hiscox Action Group (HAG), representing 400 claimants, hailed the ruling as a “massive boost” for UK businesses.

It claimed a “full victory” and added: “The decision has been unanimous against Hiscox et al.”

One HAG committee member, Mark Killick, said: “This judgment should finally mean that our members as well as businesses across the country will get the insurance they paid for.

“Quite what possessed an industry that claimed ‘my word is my bond’ to destroy its own reputation is beyond me.”

Hiscox shares were trading more than 4% down after the ruling.

It is unclear whether the decision will prompt a flood of further claims.

Huw Evans, director general of industry group the Association of British Insurers, responded: “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.

“The insurance industry expects to pay out over £1.8bn in COVID-19 related claims across a range of products, including business interruption policies.

“Customers who have made claims that are affected by the test case will be contacted by their insurer to discuss what the judgment means for their claim.”

“All valid claims will be settled as soon as possible,” he said.

(c) Sky News 2021: COVID-19: Supreme Court backs small firms over business interruption insurance claims