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Supreme Court justices today unblocked insurance claims for shutting down businesses struggling by the pandemic following a historic £ 1.2bn legal battle.
The Financial Conduct Authority (FCA) presented a test case last year on the wording of insurance policies, with business owners seeking payments for lost earnings caused by the Covid-19 pandemic.
Payments have been delayed for months as courts grapple with how the small footprint of a series of policies should be interpreted.
Today at the Supreme Court, Lord Hamblen announced that the FCA and activists had “substantially” won their case against insurers, paving the way for compensation for hard-hit companies.
The legal battle has been accelerated in the court system, and today’s ruling will be a relief for many businesses that rely on payments to survive.
Paul Smethurst, partner and forensic investigation specialist at the accounting firm Menzies, said after the decision: “Finally, companies that have been unable to trade or have lost money due to the disruption caused by the pandemic COVID-19, know where they stand with their business interruption insurance.
“Most of those who were awaiting resolution of their existing claims will now receive the compensation they are owed.”
The test case is believed to affect around 370,000 businesses and was found in favor of insurers by a High Court ruling in September.
The city regulator and the Hiscox Action Group have appealed, with Supreme Court President Lord Reed explaining: “The purpose of the proceedings is to determine what liability, if any, the policies impose on insurers to the companies that have been affected. by the Covid -19 pandemic. “
The FCA argued that some businesses that shut down at the behest of the government in March could miss out on compensation under a limited interpretation of the insurance policy, while other businesses that remained open until they are forced to close by law would benefit.
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Lord Hamblen said the judges had ruled that “an instruction given by a public authority” could constitute a restriction on the ability of businesses to open, adding that the case for a payment would be particularly strong after the Prime Minister Boris Johnson announced the first lockdown at the end of March.
Another row was about how the pandemic was to be measured and how a company could show the virus was the cause of its loss of business.
Lord Hamblen said the test for determining when Covid-19 has affected a business should be broad, applying “when at least one case of Covid-19 in a geographic area” can be identified.
Legal experts have said that while today’s decision will result in a big payout, businesses will still need to study the fine print of their insurance policies and be ready to make their case.
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