Coronavirus Blog Series: Business Interruption Insurance – Supreme Court Ruling

Published 15 January 2021

The UK Supreme Court has today ruled in favour of small business receiving payments from Business Interruption Insurance policies.

The case refers to claims for loss of earnings made by small businesses during the national lockdown in March 2020, when they were forced to close unexpectedly. Many insurers had refused to pay, stating that the business interruption policies were not designed to cover a Government-imposed lockdown and that such restrictions were only covered in specialist policies.

The Financial Conduct Authority (FCA) then brought a test case to the High Court last Summer, seeking clarity on business interruption policy clauses based on a sample of 21 policies from eight different insurers. The High Court had ruled on a representative sample of 17 policy wordings used by 16 insurers and found that most of the clauses used in the sample, do provide cover.

This was then appealed by six of the eight insurers in November 2020, with the Supreme Court issuing their final ruling on 15 January 2021. The FCA has said it would be working closely with insurers to ensure they settled claims they were now required to pay, and to make interim payments if possible.*

The Financial Ombudsman Service and courts in Scotland and Northern Ireland are expected to use the judgment to rule on other similar cases.*

MKB Law comments: The Supreme Court’s ruling is welcome news for small business owners and will provide much-needed certainty on this area of law. We would expect insurers now to engage promptly with businesses to address matters which have been put on hold pending the Court’s judgment. MKB Law has provided advice to many businesses affected by the Coronavirus pandemic, including insurance implications. If you require further advice or assistance please contact us.

This article is for general guidance only and should not be regarded as a substitute for professional legal advice.

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