The High Court insurance victory for some COVID-hit businesses.

17 September 2020
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Katherine Marshall, a solicitor within our disputes team, examines this week’s landmark business insurance ruling, which should see firms receive the insurance pay-outs they are entitled to. But there may be a delay as the insurers could appeal the decision.

The background to this test case:

As we are all aware, coronavirus has had an unprecedent impact on life as we know it, causing significant disruption for us all.

Affected businesses, forced to close during the pandemic’s height, have sought to make claims under the ‘Business Interruption’ element of their business insurance policies - believing they are entitled to recompense to cover losses and expenses.

However, their requests have been refused by their insurers. This has led to much concern amongst those who had extended policies to cover events beyond physical happenings, such as a fire or flood. These businesses believed that lost earnings due to the pandemic appeared to be covered in their policy wordings.

The resulting legal action:

The Financial Conduct Authority (FCA) brought a test case at the High Court to seek clarity of the wording of Business Insurance policies, using 21 sample wording of policies from eight different insurers.

The official proceedings began in the High Court on June 9, 2020. The claim was proceeded on expedited basis and an eight-day trial took place in July, with judgment handed down this week.

The decision:

This judgement was largely in favour of business owners with the High Court ruling that the disease clauses in some Business Insurance policies should have meant they were covered.

This judgment shall be binding on those eight insurers that were a party to the test case and is likely to provide persuasive guidance for other insurers in relation to the interpretation of the Business Insurance wording.

Nationally, it has been reported that some 370,000 firms that lost earnings as a result of lockdown could expect to receive up to £1.2 billion in damages.

The future:

It is awaited to see if Insurers appeal the decision, and so all is not yet resolved.

However, unless successfully appealed, the High Court judgment is legally binding on the eight insurers that were part of the case. And, as stated above, for insurance policies with similar policy wordings and claims, the FCA says it will be much harder for insurers to avoid paying.

It is therefore important that businesses, if they have not already done so, check their policy wordings and take advice if necessary, on what impact this ruling may have upon their ability to issue successful claims.

For more advice Katherine can be contacted by email: Katherine.marshall@wilkinchapman.co.uk or telephone: 01522 515015.


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