Business Interruption? You’re Covered!

In our article posted in June 2020 (‘Business Interruption – Is Your Business Covered?’), we explained how the Financial Conduct Authority (‘FCA’) were bringing a test case, to establish whether insurers need to pay out on claims for business interruption (‘BI’) caused by the Covid-19 restrictions.

BI cover usually forms part of the insurance policy which deals with property damage.  If the damage is covered by the policy, and if the damage results in an interruption to the business, the insurer would normally be expected to pay out on a BI claim.   However, there was considerable uncertainty as to whether such claims would succeed where the interruption was related to the virus.

Early indications were that such claims would not be covered but, in September 2020, the High Court said that most disease and access clauses would cover the pandemic. Some insurers appealed but, on 15 January 2021, after having analysed different policies from various insurers, the UK’s highest court sided with businesses.

In addition, the court ruled that cover may be available for partial closure of premises (as well as full closure) and for mandatory closure orders that were not legally binding; and valid claims should not be reduced because the loss would have resulted in any event from the pandemic.

This will mean that more policyholders will have valid claims, and some pay-outs will be higher.

The decision will be legally binding on the insurers that were parties to the test case: Arch Insurance (UK) Ltd; Argenta Syndicate Management Ltd; Ecclesiastical Insurance Office Plc; MS Amlin Underwriting Ltd; Hiscox Insurance Company Ltd; QBE UK Ltd; Royal & Sun Alliance Insurance Plc; Zurich Insurance Plc.

The judgment also provides authoritative guidance for the interpretation of similar policy wordings and claims.

If your company has claimed for BI losses resulting from the pandemic, your insurer should now have all the information to make a decision. In most cases, it is expected that the Supreme Court’s recent ruling will mean these claims should be paid.

Bartons Solicitors have commercial lawyers with expertise in insurance law and litigation.  We are regularly instructed to advise on behalf of insurers and we will also accept instructions from business policyholders to investigate disputes with the insurer. If you own a business and have experienced problems when claiming for business interruption, we may be able to assist.  Feel free to contact us for a no-obligation discussion, to see if we can help.