Following the initial shock of the COVID-19 pandemic and the changes to trading enforced by lockdowns, many businesses were relieved at their foresight to take out business interruption insurance policies.

This relief then turned to frustration as insurance companies began rejecting their claims citing a variety of reasons. By early May 2020, the FCA (the Financial Conduct Authority) knew of approximately 8,500 such claims totalling around £1.2 billion.

In July 2020, a test case of the most common policy wordings was brought before the High Court by the Financial Conduct Authority involving eight insurers who sold business interruption cover.

The proceedings covered issues including whether the business owners were permitted entry to their properties, clauses involving diseases and the timing of lost earnings. The High Court ruled largely in favour of the FCA, and that ruling was appealed by the eight insurers to the Supreme Court.  The Supreme Court recently found largely in favour of the FCA and decided that most businesses were entitled to receive payments under their business interruption policies.

The FCA will be working with the insurers to ensure prompt payments of claims affected by the judgment. The Association of British Insurers has stated that policy holders will be contacted by their insurer if they have an ongoing claim or complaint against their insurer which is affected by the Supreme Court’s decision. Policy holders who have not notified their insurer of a claim, should make contact with their insurer immediately.

While this is of course a welcome decision, policy holders should note that this remains a complicated area. Of the 21 sample policy wordings considered by the Supreme Court, not all were found to be covered. It would seem, that the devil is in the detail of the wording of each policy.

Bridge McFarland are able to consider your individual policy in light of the recent ruling and advise you if your policy is likely to be covered.

Following this judgment, it is likely that policies will be reworded to limit or exclude liability for future pandemics and businesses should pay particular attention to this issue when renewing their insurance policies.