The global COVID-19 pandemic has had a huge impact on business and many businesses have struggled to stay afloat due to the restrictions placed on trading at various times by the Government. Ranging from closure orders to limiting the sale of certain goods, and limiting trading hours, businesses have had to cope with a level of uncertainty that has rendered trading a case of day-by-day survival and caused havoc with logistics and general operations.
To say that business has been interrupted would be a gross understatement. Yet, many SMEs who have tried to claim for business interruption losses caused by the pandemic have found themselves at odds with insurers who have argued that their policy doesn’t cover such losses and have accordingly refused to pay claims.
Concerned by the lack of clarity around certain types of policy and business interruption clauses, the Financial Conduct Authority took a test case on behalf of a number of businesses and asked the Court to resolve some of the uncertainty and determine whether or not insurers were liable to pay claims for losses caused by COVID.
The High Court found in favour of the FCA in September 2020, but that decision resulted in an appeal being fast-tracked through to the Supreme Court. The decision on Friday substantially allowed the appeal by the FCA and found that policies containing “disease clauses” or “prevention of access clauses” cover losses caused by the pandemic and the associated restrictions on trading.
In simple terms, the Supreme Court has widened the scope of cover provided by a number of business interruption insurance policies.
Whilst the case has been received positively by the business sector, it was a large test case which asked the Courts to resolve complex issues of law; it is certainly helpful for businesses in dealing with their insurance companies, but it did not result in a global mandate to insurers to pay all claims, nor dictate the level of individual claims. There is still room for argument between businesses and their insurer and ultimately it will come down to the exact wording of the policy and the circumstances of each case.
For advice on whether your business has a claim under a business interruption policy, or for assistance in dealing with an insurer that is disputing coverage, please contact Dean Parnell on 08081668827
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