The Supreme Court ruling opens the door for up to £1.2 billion of business interruption claims

The UK Supreme Court decision to dismiss insurers’ appeals in the FCA’s test case on the interpretation of business interruption (BI) policy wordings has been welcomed by UK risk and insurance association Airmic. 

The UK’s highest court also decreed that appeals made by the FCA and lobby group Hiscox Action Group (HAG) are substantially allowed.

It said that around 700 policies at 60 different insurers could be affected by the judgment, in addition to the policies that were reviewed as part of the test case.

John Ludlow, CEO of Airmic, commented: “The Supreme Court’s landmark ruling today on the FCA’s business interruption (BI) insurance case for Covid-19 claims is one of the most important legal issues of the last decade.”

“Affected policyholders will welcome the ruling to unanimously dismiss insurers’ appeals and to substantially allow all four of the FCA’s appeals in favour of policyholders.”

Julia Graham, Airmic’s deputy CEO and technical director, commented: “This morning’s decision by the Supreme Court represents positive news for hundreds of thousands of commercial insurance buyers across the UK. The Supreme Court’s ruling completes the legal process for impacted policies and means that many more claims can now be processed and paid out to businesses that are already feeling the strain during the pandemic period.”

“To provide some scale to the significance of this morning’s Supreme Court ruling, the FCA has estimated that some 370,000 policyholders would be affected by today’s Supreme Court decision, paving the way for up to £1.2bn in business interruption claims payments, across 700 policy types, from 60 insurers.”

Ludlow added: “Insurance buyers have faced a harsh insurance market in 2020-2021. The rocky business conditions felt by many during the pandemic and the resultant economic downturn have been met with hard insurance market pricing during recent renewals discussions.”

“Many of the insurance buyers affected by the FCA’s BI case are long-term insurance partners; now that many more of these BI claims are to be paid, it will be to the benefit of enduring relationships between carriers and their policyholders, which in many cases were already strained not just by this case but by recent market conditions. Today’s news should be viewed within that broader context.”

In a separate announcement, the UK Federation of Small Business (FSB) said the judgement was a “big victory” and that small firms everywhere were “breathing a sigh of relief”.

FSB national chair Mike Cherry said: “Today’s judgement is a big victory. It cements the high court’s decision to grant businesses left on the brink the insurance pay-outs they are rightfully owed. For many, it has been a long and difficult road to get to this stage so this will bring clarity and hope to the thousands of firms which have been left in financial limbo for almost a year.

“While this is good news, and while the law has to follow procedure, it’s disappointing that so many small businesses have had to wait to get the money they desperately need under policies they believed were there to protect them, policies they bought in good faith.

“Businesses deserve to be protected in a timely way, but instead they have been failed by their insurers and are now trying to make up for lost time. Providers must now pay-out quickly, and consider the steps they can take to progress these claims in a swift and seamless manner. Any paperwork required of claimants shouldn’t be onerous or time-consuming. 

“Small businesses contribute trillions to the economy. The Financial Conduct Authority (FCA) was right to argue that disease or denial of access clauses within interruption policies should trigger pay-outs in the event of coronavirus-linked disruption. We are hugely grateful for its work in this space.”