Insurers and FCA return to court over business interruption

Insurers and FCA return to court over business interruption

The FCA and insurers have failed to come to an agreement on the interpretation of an earlier High Court judgement on business interruption insurance.

There was some respite for struggling UK businesses last month after winning a landmark test case to establish whether COVID-19 affected firms could claim against their business interruption insurance. However, as expected, the dispute with insurers is not quite over yet.

The FCA had hoped to reach an agreement with insurers on the interpretation of the High Court ruling affecting which policyholders qualify for a pay-out and how much. It was hoped the agreement could be made before the close of play yesterday.

With no agreement in sight, the FCA has now filed a skeleton argument with the High Court. It is expected that the FCA will ask the court for a certificate to apply to go directly to the Supreme Court, leapfrogging the Court of Appeal. There is expected to be hearing tomorrow.

The reason for bypassing the Court of Appeal is to speed the process up for struggling UK businesses who simply want clarity on whether they are eligible to claim against their insurance policies. 

The FCA stated about the development:

 We will continue discussions with insurers and action groups, to find a solution which resolves the outstanding issues as soon as possible to enable pay-outs on eligible claims.


What is the Business Interruption Claims dispute over?

Before COVID-19 brought the business world to a grinding halt, insurers sold companies business interruption insurance policies. The idea of these policies is that they pay out when a business is forced to shut down owing to a disaster which is out of their hands. This disaster could be a fire, a flood, or it could be a global pandemic.

An issue was brought to light when one such insurer, Hiscox, refused to pay out on many business interruption policies. Their policy documents state that they will cover financial losses for businesses who are unable to use their premises following:

an occurrence of any human infectious or human contagious disease, an outbreak of which must be notified to the local authority.

However, Hiscox and other insurers argued that the policy does not provide cover for business interruption as a result of “general measures” taken by the Government in response to the pandemic.

Insurers also argued there would have to be a disease in the company’s “vicinity” for the policy to pay out. However, the FCA argued:

An occurrence of COVID-19 within at least the same city, town or village or other development is always likely to be within the Vicinity; and in any case the area involved remains relatively wide.

One of the first cases that brought the issue to light was that of Paul Daly back in April 2020. The disgruntled business owner runs Roadtrip and The Workshop bars in Shoreditch, London. He pays £18,000 a year for his business interruption insurance policy with Hiscox. Since the lockdown, his income has been decimated, and his claim for business interruption turned down. Back in April, he said of the matter:

People’s livelihoods are at stake here. I’m worried. It shouldn’t have to be into this when I’ve spent tens of thousands of pounds on insurance. It’s like someone came into my bar and bought a drink and then I don’t give it to them.

The High Court ruled on September 15th 2020 that the majority of businesses who held business interruption insurance policies and were forced to close due to the COVID-19 pandemic are entitled to compensation from the insurers, subject to the limits of their policy.


How can you claim business interruption compensation?

Smooth Commercial Law have a finger on the pulse of the current business interruption court case. Should you have a current business interruption claim against your insurer with us, we will keep you updated through every stage.

Claiming business interruption compensation through business insurance could be the only hope of survival for many UK business owners. Having said this, the wording of the insurance policies is often very complex and sometimes unique to each business.

If you believe you are entitled to business interruption compensation and your insurer isn’t paying out, our expert solicitors are able to go through your policy carefully to determine whether you may be able to claim.

If we believe you are eligible and your insurer disagrees, our team can calculate your potential losses and challenge the insurer for you. Our expertise with working with insurance companies, the FCA and the FSCS means that we can present your claim in a way that is dealt with promptly and efficiently.

Our legal team come from a financial services and compliance background. We are regulated and authorised by the Solicitors Regulation. 

If you would like to speak to one of our Business Interruption Claim Solicitors, you can do by calling 0800 046 9976 or by completing an enquiry form.

You can also contact Smooth Commercial Law Directors via email:

Scott Birchall -

Paul McKittrick -


The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.