Supreme Court ruling could lead to COVID insurance payouts

Judgement “substantially allows” FCA appeal on business interruption claims

BUSINESSES could be in line for insurance payouts due to the COVID-19 pandemic following a court ruling.

The judgement from the Supreme Court today (15th January) “substantially allows” the Financial Conduct Authority’s (FCA’s) appeal on behalf of policyholders, which sought clarity on a number of points surrounding business interruption policy wording, including ‘disease clauses’ and prevention of access and public authority closures or restrictions (‘prevention of access clauses’). The FCA’s test case covered a sample of 21 types of policy issued by eight insurers.

A High Court judgment last September found that the insurers were liable to pay out in most, but not all, of the policies presented; insurers and the FCA then made ‘leapfrog’ appeals to the Supreme Court (without going to the Court of Appeal first).

Today’s Supreme Court ruling “substantially allows the FCA’s appeal and dismisses the insurers’ appeals”.

Sheldon Mills, executive director for consumers and competition at the FCA, said: “Our aim throughout this test case has been to get clarity for as wide a range of parties as possible, as quickly as possible, and today’s judgment decisively removes many of the roadblocks to claims by policyholders.

“We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible. Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.

“As we have recognised from the start of this case, tens of thousands of small firms and potentially hundreds of thousands of jobs are relying on this.”

The ruling has been welcomed by hospitality industry trade groups.

Kate Nicholls, chief executive of UK Hospitality, said: “Obviously, we still need to pore over the details, but, at first glance, this looks like very positive news.

“Businesses took out policies in good faith and it is right that insurers stick to these agreements and honour claims.

“Should this result in pay-outs to policy holders – a point which is still not clear at present – this could provide an additional lifeline that many businesses desperately need. It could be the difference between keeping staff members on or being forced to let them go; it could mean the survival of a business that was previously staring collapse in the face.”

Emma McClarkin, chief executive of the British Beer & Pub Association (BBPA), said: “This landmark ruling is great news for pubs and brewers who hadn’t received payouts on business interruption insurance thus far. It is a glimmer of hope in what is an incredibly tough time for our sector.”