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13 February 2021

Covid Insurance

The background

In the first lockdown of Spring, 2020, many small businesses had to close and as a result, made claims through their business interruption insurance policies for subsequent loss of earnings/profits.

Unfortunately, many insurers refused to pay. They argued that only the most highly specialized  policies would cover such exceptional circumstances.

However, following a test case brought by the Financial Conduct Authority (FCA) last summer against a number of insurance companies, the High Court judgement, and a number of unsurprising appeals, the Supreme Court has now ruled. The Supreme Court has concluded that the disease clauses in some business interruption policies should have meant businesses were covered.

What happens now?

It is expected that many previously discounted claims will need to be reviewed but that the ruling will also result in an influx of new claims. Prompted by this turnaround, Huw Evans, Director General of industry group, the Association of British Insurers, said, “Customers who have made claims that are affected by the test case will be contacted by their insurer to discuss what the judgment means for their claim.”

COVID-19 related claims across a range of products, including business interruption policies, could amount to as much as £1.8bn and affect as many as 370,000 businesses.

Making a claim

You should apply directly through your insurers and it is hoped that given the ruling of the Supreme Court, insurers will be more expedient in resolving claims, although they are within their rights to appeal your claim.

What should you do if your claim is rejected?

If your claim is rejected by your insurer and you believe the decision is incorrect, you can challenge the decision by making a complaint to the Financial Ombudsman Service (FOS). A free service, the FOS is available to consumers, charities, trusts and small and medium-sized businesses. If you want to use the services of the FOS, you may need to make a complaint in the first instance with your insurer.

Still not getting the outcome you want?  Then this becomes a legal matter and we would suggest you seek professional legal advice.

NB. Policies are likely to have been amended for new and renewing customers since this issue emerged, so losses from the latest lockdown measures should be clearly stated as part of the cover – or not – in new business interruption insurance policies.