Business interruption claims
Unless you have been living on a desert island recently (and who wouldn’t want to be!), you will be aware of the recent decisions in relation to insurance policies and business interruption clauses.
The background to the recent Supreme Court decision is that following on from the first lockdown in 2020, many insurers refused to pay out to businesses even where there was a business interruption clause which, on the face of it, should have triggered a payment.
Faced with an increasing number of complaints and claims being threatened, The Financial Conduct Authority (FCA) chose to take a case to the court for a determination of what the clauses did or did not cover.
The case put a number of specific clauses in specific insurers’ policies to the test and sought clarity on provisions such as geographical restrictions and prevention of access issues within the appropriate definition clauses in the policies.
An initial judgment was issued on 15 September 2020 but several insurers, and the FCA, appealed some of the findings to the Supreme Court.
In light of the public interest in the points being raised, the Supreme Court fast-tracked the matter and a final decision was given on 15 January 2021 – the full judgment can be found here.
I do not propose analysing the judgment in detail here. There are copious excellent articles across the Internet which do that.
Overall, the decision is favourable to policyholders and should give heart to a lot of businesses who will now be able to bring claims.
BUT, and it is a big but, there is a word of caution to be injected here.
The court decision relates to specific clauses and wording in specific policies from named companies, such as Hiscox, QBE and RSA.
It does not cover every policy and every clause. Whilst the decision can be applied to assist the interpretation of other policies, the court is clear that each policy needs to be interpreted based on its own working and circumstances.
Note should be taken of the FCA’s own letter dated 22 January 2021 which states:
“It remains the case that most SME BI [Business Interruption] policies are focused on property damage and only have basic cover for BI as a consequence of property damage, so are unlikely to pay out in relation to the Covid-19 pandemic and its effects.”
It is not a case, therefore, that all business owners will be able to claim for their losses and care should be taken before launching into a full claim. We have already had clients whose policies do not cover their losses and there will be plenty more out there.
We are happy to review the provisions of your insurance policy and to advise on whether you are likely to be covered.
Specialist dispute resolution solicitors