In one of the most eagerly anticipated legal verdicts in recent years, the UK’s Supreme Court has unanimously dismissed Insurers’ appeals in the COVID-19 Business Interruption insurance test case brought by the Financial Conduct Authority (FCA).
According to law firm Herbert Smith Freehills, which acted for the FCA, the court also allowed all four of the FCA’s appeals (in two cases on a qualified basis), bringing positive news to policyholders across the country that have suffered business interruption losses as a result of the COVID-19 pandemic.
The proceedings were brought to determine issues of principle on policy coverage and causation under various specimen insurance wordings in respect of policyholder claims for business interruption losses arising in the context of the COVID-19 pandemic.
The FCA had previously estimated that some 370,000 policyholders could be affected by the judgment.
At least 60 insurers have or have had a stake in the long-running legal proceedings.
According to Herbert Smith, the Supreme Court judgment brings definitive guidance on the proper operation of cover under certain non-damage business interruption insurance extensions and clarity to policyholders and insurers alike:
“This is a very positive result for policyholders,” said Paul Lewis, partner and global head of Insurance Disputes at the firm.
“It improves their position significantly beyond that which was already established by the High Court judgment. Importantly also for the insurance industry the judgment brings definitive guidance to how business interruption insurance wordings should operate in the context of the COVID-19 pandemic, which has had such a devastating effect on businesses across the country.”
Commenting on the decision, Federation of Small Businesses (FSB) national chair Mike Cherry labelled the judgement “a big victory”.
“It cements the high court’s decision to grant businesses left on the brink the insurance pay-outs they are rightfully owed. For many, it has been a long and difficult road to get to this stage so this will bring clarity and hope to the thousands of firms which have been left in financial limbo for almost a year.
“While this is good news, and while the law has to follow procedure, it’s disappointing that so many small businesses have had to wait to get the money they desperately need under policies they believed were there to protect them, policies they bought in good faith.”
“Businesses deserve to be protected in a timely way, but instead they have been failed by their insurers and are now trying to make up for lost time. Providers must now pay-out quickly, and consider the steps they can take to progress these claims in a swift and seamless manner. Any paperwork required of claimants shouldn’t be onerous or time-consuming.”
Roger Franklin, London Solicitors Litigation Association committee member and head of Insurance Litigation at Edwin Coe added:
“This is an important and keenly awaited decision for the many thousands of commercial policyholders seeking to recover losses caused by COVID 19. It’s been a desperate time for small businesses, and this positive judgment is like the arrival of a financial vaccine for them.”