The Supreme Court’s decision on 15 January 2021 concerning business interruption insurance has delivered much needed good news to thousands of small businesses across England and Wales. In the appeal to the test case brought by the Financial Conduct Authority, the Supreme Court considered the wording of a number of business interruption policies and found largely that insurers were liable to compensate businesses for the losses incurred as a result of the pandemic restrictions.

The Court ruled that:

  • Cover may be available for partial closure of premises (as well as full closure) and for mandatory closure orders that were not legally binding.
  • Valid claims should not be reduced because the loss would have resulted in any event from the COVID-19 pandemic.
  • Disease clauses cover only the effects of cases of COVID-19 occurring within the specified radius of the insured premises (and not cases of COVID-19 in the wider area).

The Supreme Court judgment means that many thousands of policyholders who have cover should now have their claims for COVID-19-related business interruption losses paid. Since the court ruling, the FCA has published guidance to all insurers, stating that it is keen for all businesses with valid business insurance claims to receive payments due to them as soon as possible. However, it is important to remember that the precise wording of each policy must be considered against the judgments (both the Supreme Court judgment and the certain aspects of the High Court judgment) to establish what it means for that policy. The judgment does not determine how much is payable under individual policies, but provides the basis for doing so.

Whilst the supreme court decision is encouraging, there will inevitably still be issues to be determined in each claim and in relation to the wording of each individual policy.

Ellisons continues to help businesses navigate their way through the COVID-19 crisis, to discuss how we could help you please contact Ellisons’ Dispute Resolution team on 01206 764477.