Whilst not strictly speaking an employment law related update, this is breaking news for small businesses who have been impacted by the Covid-19 pandemic, who have the benefit of Business Interruption Insurance (“BII”).
On Friday 15 January 2021, in a landmark judgment of the Supreme Court (the highest appeal court in the UK), it has been confirmed that insurers who rejected Covid-19 related claims under BII policies had approached the policies too narrowly, with the Supreme Court finding in favour of businesses.
Background
Following the outbreak of the Covid-19 pandemic in March 2020, and the associated lockdown measures introduced by the Government, many businesses sought to make claims under their BII policies for losses suffered as a result of the impact of Covid-19. Insurers, however, largely rejected the claims, suggesting that the pandemic was not covered by the provisions of their policies.
In an effort to provide clarity and certainty on the issue of how to interpret BII policies generally, the Financial Conduct Authority (“FCA”), which is the organisation that oversees the insurance sector, by agreement with the insurers concerned, brought a test case in the High Court to seek to determine whether or not the way in which insurance companies had rejected claims (specifically by their narrow interpretation of the wording of the policies) was permitted.
The Judgment
The test case looked at a variety of different types of insurance policies, and focused on the particular clauses that the insurance companies were seeking to rely on to reject claims by businesses for cover for their losses relating to Covid-19. The High Court found in favour of businesses in respect of the majority of clauses, and although the matter was then appealed to the Supreme Court, the Supreme Court went further, and found in favour of businesses entirely, meaning that for many businesses who had previously been told that they could not claim under their BII, they will now be able to do so.
The decision may well result in insurers reviewing their policy wordings to deal with the scenario of a pandemic and adjust premiums accordingly in the future. For the time being, however, the insurance cover upheld by the ruling will undoubtedly be a lifeline for a number of small and medium-sized businesses in particular.
Further details of the case can be found here, however, following the ruling business owners are encouraged to review their insurance provisions for any potential business interruption cover, and seek advice to establish whether clauses in their policies fall within those that will now benefit from the Court’s findings.
Note: The content of this article is for general information only and does not constitute legal advice. Specific legal advice should be taken in any particular circumstance. If you would like more information on the content of this article, please contact the Leathes Prior Litigation & Dispute Resolution Team by emailing email hidden; JavaScript is required or by calling 01603 610911.
