On 15th September 2020, the FCA announced that it had been largely successful in its legal challenge brought against a number of insurers and their decisions to refuse coverage to small businesses claiming for COVID-19 related losses under their business interruption (BI) policies.
Business Insurance Test Case Verdict
Within the test case, the court considered the policy wordings of 17 different sample insurance policies. It held that, in most cases but not all, the businesses ought to be compensated by their insurers to ensure that they are put back into the position they would have been in had the pandemic not occurred.
Why is the Verdict so Important?
The judgment was achieved very quickly in an expedited court process and this verdict will impact hundreds of BI policies and provides previously-absent legal precedent. UK businesses in dispute with their insurers over business interruption claims will now have a reference point against which to consider their claims, even where their insurers were not involved in the test case. The judgment will also provide guidance for insurers who were previously unsure about the applicability of their policies to losses caused by the government lockdown.
Insurer appeals to the judgment are anticipated promptly, but the FCA has urged insurers to honour claims, irrespective of any appeal they may wish to bring.
These kind of disputes are highly fact specific. Not all business’ BI policy wording will be on all fours with the sample wording considered in the review, and businesses will have suffered in different ways from the government lockdown. Bespoke legal advice should be obtained so that businesses can properly consider their position.