Supreme Court success for FCA and small businesses in Covid-19 Business Interruption case

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Back in September 2020, we reported on the ruling of the High Court regarding the disputed interpretations of sample policy wording of insurance cover for businesses. The Financial Conduct Authority brought the test case to obtain clarification on certain ‘disease’ clauses which insurers were using to withhold pay-outs for business interruption resulting from the pandemic.

It was widely reported and, as anticipated, a majority of the insurers involved sought to appeal the decision which largely favoured policy holders. The FCA also appealed the decision in order to seek a more favourable outcome for all the policy wordings tested. The appeals were ‘leap-frogged’ to the Supreme Court and heard in November.

The decision of the Supreme Court handed down on Friday 15 January allows the FCA appeal and dismisses the insurers’ appeals. Lord Hamblen and Lord Leggat gave the main judgment and, in his separate but concurring judgment, Lord Briggs stated:

‘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.’

In discussing the landmark victory, a spokesman for the FCA implored insurers to ‘immediately start doing the right thing and settle these claims.’

This is a significant victory for small businesses who face more uncertainty as a result of lockdown 3.0. As with the previous ruling, insurers should be in contact with all policy holders who are affected by the judgment. If you are in any doubt as to whether this impacts you, we would advise you to contact your insurer.