COVID business interruption insurance – the final instalment?

Legal Action Over Business Interruption Insurance Cover for Covid-19 - The final instalment?

Update on the business interruption case blogs made earlier in the year: For the story so far, see our previous blogs: here and here.

The Supreme Court (our final court of appeal) has today (15 January 2020) delivered its judgment on the appeals from the FCA test case Judgment that was delivered by the High Court in September 2020. That judgment was heralded as a victory for insured businesses against insurers who had found technical reasons to avoid paying out on business interruption policies for losses caused by the Coronavirus outbreak and the consequent local & national lockdowns.

All of the insurers' grounds of appeal were rejected by the Supreme Court. The highest court in the land has now given guidance on how common business interruption clauses should be interpreted. These are technical points of legal interpretation and their application to any particular circumstance will depend upon the specific wording of each policy. However, the FCA will now require all insurers who have declined to pay out on claims under such policies to contact those businesses whose claims were wrongly declined and to honour the policy. There will be other policy holders who might have delayed making a claim because of the widespread publicity about the uncertainty over pay-outs. It is very important that they do not delay making a claim any longer as there are policy time limits for notifying insurers about a potential claim.

Most of the affected businesses could not comprehend how their insurer could possibly argue that losses due to lockdown in a global pandemic were not business interruption losses and whilst that might be a bit of an over-simplification it is a sentiment that one of the Supreme Court judges Lord Briggs didn't hold back from when he said in his judgment (at paragraph 316):

"........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."

That brings to mind the old adage: "You're only insured until you make a claim".

It is estimated that 370,000 businesses will now be able to make claims worth at least £1.2 billion & of course continuing to mount in many sectors.
This is the link to the Supreme Court's Judgment which at 96 pages is a challenging read:
The Financial Conduct Authority and others (Appellant/Respondents) v Arch Insurance (UK) Ltd and others (Respondents/Appellant) (supremecourt.uk)