Business interruption insurance policy holders have scored an important victory in the High Court.
A test case bought by the Financial Conduct Authority sought to clarify insurers’ liability for payouts due to the pandemic. The High Court ruled in favour of the FCA’s arguments bought on behalf of policyholders “on the majority of the key issues”.
Most small business policies focus on property damage and have only basic business interruption cover as a consequence of property damage. However, some policies also cover business interruption from other causes including infectious or notifiable diseases.
“In some cases, insurers have accepted liability under these policies. In other cases, insurers have disputed liability while policyholders considered that it existed, leading to widespread concern about the lack of clarity and certainty,” the FCA said.
The 162-page ruling orders insurers to write to claimants within seven days detailing their response.
Christopher Woolard, FCA interim chief executive, said: “Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful.
“Insurers should reflect on the clarity provided here and, irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgment says should be paid. They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.”
Graeme Brett of Westoe Travel told TTG: “We will have to see what response our insurers give and if they are still refusing to pay out, we will take legal advice on their interpretation of the ruling.”
Insurers have the right of appeal, but Woolard said: “If any parties do appeal the judgment, we would expect that to be done in as rapid a manner as possible in line with the agreement that we made with insurers at the start of this process.
“As we have recognised from the start of this case, thousands of small firms and potentially hundreds of thousands of jobs are relying on this.”