The Supreme Court has ruled in favour of the FCA and businesses up and down the country. The ruling means insurers need to pay out if firms have relevant business interruption policies.
Positive news is breaking today for Covid-19 ravaged companies as the UK Supreme Court has upheld the original judgment on the Financial Conduct Authority’s (FCA) business interruption case against insurers.
Via a live video link this morning (Friday 15th), a UK Supreme Court representative stated the decision of the appeals of both the FCA and the Hiscox Action Group.
The representative said:
“the appeals of the Financial Conduct Authority and the Hiscox Action Group are substantially allowed, and the insurers appeals are dismissed.”
This is a landmark ruling for the business interruption dispute between UK small businesses and business interruption insurers. It will be much welcome news for many who are struggling to cope throughout a third lockdown.
Estimates show that approximately 370,000 small businesses may be affected by the outcome of this, with analysts estimating that between £3.7b - £7.4b worth of claims are at stake.
Why was the case in the Supreme Court?
There was some respite for struggling UK businesses in October 2020 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 did not end there.
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 was owed to them.
It was hoped at the time that the agreement could be made without much fuss. However, the insurers appealed the decision, disputing the construction of certain provisions in the relevant insurance policies.
With no agreement in sight, the FCA filed a skeleton argument in October with the High Court. The FCA asked the court for a certificate to apply to go directly to the Supreme Court, leapfrogging the Court of Appeal.
Five Supreme Court justices have been hearing a case between the Financial Conduct Authority and six insurance companies since November.
What does the ruling mean for businesses?
The Supreme Court ruling means that UK businesses who believe they have a legitimate claim for compensation from their business interruption policy are now entitled to payment from their insurer.
For insurers and reinsurers Arch, Argenta, Hiscox, MS Amlin, RSA, and QBE, their appeals have been dismissed. This means that the coverage will have to be honoured and in certain instances, where insurers had previously denied cover.
Sheldon Mills, Executive Director, Consumers and Competition at the FCA stated about the ruling:
Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. This test case involved complex legal issues. Our aim throughout this test case has been to get clarity for as wide a range of parties as possible, as quickly as possible, and today’s judgment decisively removes many of the roadblocks to claims by policyholders.
We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible. Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.
If your insurer is still refusing payment, Smooth Commercial Law can help you claim. We currently have a number of business interruption cases and are helping business owners claim what it rightfully owed to them.
What was the initial 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?
Today’s ruling only strengthens small businesses claims against insurers, who are still refusing to pay out on many policies. This is where Smooth Commercial Law can help.
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. Smooth Commercial Law can determine whether you are covered or not.
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.
You can also contact Smooth Commercial Law Directors via email:
Scott Birchall - firstname.lastname@example.org
Paul McKittrick - email@example.com