Business Insurance Claims ruling – good news for thousands of small businesses

Thousands of businesses across the UK could be offered a financial ‘lifeline’ following the judgement handed down by The Supreme Court in the FCA Business Interruption Test Case.

The Court has now dismissed appeals by insurers and this final word on the meaning of various business interruption clauses means the industry is now expected to pay out on a number of Coronavirus claims.

The test case was brought by the Financial Conduct Authority (FCA) under the Financial Markets Test Case Scheme for the benefit of policyholders, most of whom are small and mid-sized businesses, against eight insurers for their refusal to pay out on business interruption claims. From hotels to hairdressers, pubs and restaurants to nightclubs, all had to close during the first and subsequent lock downs, severely affecting their cash flow and their ability to reopen and trade in the future.

At the beginning of the pandemic many business owners turned to their business insurers believing they were covered, but their claims were rejected. In May 2020 there was a lot of confusion about the wording of different insurance policies, with The Association of British Insurers saying that business interruption policies do not cover pandemics.

A number of pressure groups were formed to challenge this including around 400 businesses who make up the Hiscox Action Group.

The FCA identified a representative sample of 21 policy wordings that it considered captured the majority of the key issues that could be in dispute. The purpose of the test case was to seek an authoratitive declaratory judgement about the meaning and effect of certain business interruption insurance policy wordings where there remains unresolved uncertainty.

Leroy Bradley, at Gullands comments: “Many business owners will now be able to make a successful claim following this ruling and we are happy to discuss policy wording and the potential for any claims that have not yet been made. We urge all business owners to review their policy wording and to get in touch to see if they may benefit from this ruling.”

Leroy Bradley is a Partner at Gullands Solicitors and can be contacted l.bradley@gullands.com