Supreme Court rules in FCA business interruption case regarding COVID-19 claims

At the start of the national restrictions back in March 2020, businesses expected to be able to claim under their business interruption insurance cover for the losses incurred as a result of closing or being partially closed however as many found, this was not the case.

Following the SARS outbreak in 2002, many insurers updated their wording to exclude cover for ‘non-specified diseases’ as they had seen the potential costs relating to such an event, however many policyholders still questioned whether the enforced Government shut down allowed them to make a claim.

Insurers said no, leading to the FCA’s involvement in creating a test case of claims to assist the policyholder and provide clarity to insurance providers on what could and could not be claimed for under business interruption policies. The test case was built on claims against a number of policy types from a small group of insurers, with the FCA noting that the case would affect up to 370,000 businesses.

The Supreme Court ruled in favour of the FCA but widened the policy types that should pay out and provided clarity on how insurers should assess the amount of compensation due.

Hailed as a victory, many have questioned how many businesses will actually benefit from the ruling. It is estimated that only 5% of businesses have cover for non-specified diseases and even the Chancellor commented in 2020 that many will not ‘have requisite insurance’ in place.

Businesses who have already submitted a claim will now be contacted by their provider to discuss whether the judgement impacts their claim with policyholders also being advised to check insurer websites for updates on the judgment.

The FCA has provided more detail of the case and outcome on their website along with a list of policies which are potentially affected.

For further information on business interruption claims, please contact Michaela Johns on 023 8046 1256.