Do you have a business interruption insurance claim arising from the pandemic?

posted by Helen Bull

The Supreme Court decision has handed down a critical judgment in a test case to seek clarity on Business Interruption Insurance policies and how insurers should treat claims arising out the coronavirus pandemic.

Such a policy enables the claimant to seek recovery for losses arising out of the closure of commercial premises as a consequence of the pandemic.

We are providing an initial fixed fee service to help businesses understand whether they may have a valid claims

Many businesses across the UK will have been eagerly awaiting the final decision in the FCA Business Interruption Insurance test Case. The decision was handed down on 15 January 2021.

Broadly in line with an earlier decision in the High Court, the Supreme Court has largely preferred the FCA and policyholders and the insurers appeals have been dismissed.  

Businesses across England and Wales that have the same, or sufficiently similar, worded policies to the sample policies considered by the Supreme Court will now be able to rely on the judgment in order to attempt to seek recovery from insurers of the losses arising from business interruption during the pandemic.

We summarize the findings in main categories of policy wordings considered by the court in non-damage BI cover claims:

  • Notifiable Diseases:

The High Court found that local outbreaks of Covid-19 were indivisible from the wider effects and that the proximity requirements set out in the sample wording would be satisfied as a result. Alternatively, that Covid-19 was so widespread that there were many different effective causes.

The Supreme Court judgment is more narrow than the earlier High Court approach in that it requires a claim arising from an occurrence of a notifiable disease within the radius set out within the policy. However, the court acknowledged that the policies do not typically limit cover to only interruption caused by the specific instance of the disease within the radius and that Covid-19 has the capacity to impact a wide area. Therefore, importantly – claims arising out of the wider impact should be covered.

  • Prevention of access:

The earlier High Court decision constructed prevention of access clauses restrictively and held that this type of cover was intended to provide cover for an event happening in a local area at a particular time, as opposed to the ‘national’ lockdowns experienced on and off since the start of the pandemic.

However, the Supreme Court judgment was again more favourable to policyholders in that restrictions on accessing premises did not necessarily require a legal lockdown or prevention of   access in order for a claim under these types of clauses to be valid. The Court referenced the initial March 2020 national lockdown and the requirements for businesses to close during the subsequent period as being sufficient to satisfy this criteria.

Next Steps for Businesses and Policy holders

It remains that the court’s decision is not an open door for all types of business interruption claims, but the decision provides clarity on the types of claims that should be accepted by insurers. It is estimated that the decision will benefit over 370,000 policyholders and removes the blanket refusal by insurers for claims arising from the pandemic.

Policyholders will still need to carefully consider their policy wording and be aware of the notification requirements set out in policies.

We are providing an initial fixed fee service of £350 plus VAT to assist in reviewing the terms of business interruption policies to consider:

  • Whether there is scope to revisit any refused claim and consider the validity of any claims put forward to insurers in light of the court’s decision;
  • Review policy wording to consider the likelihood of prospect of success of BI claims not yet submitted to insurers; and
  • Advise in relation to settlement offers made by insurers in respect of claims for BI that have been accepted and whether the sums put forward adequately reflect the court’s decision.

If you have any queries in relation to the above, or wish to have a no obligation discussion with regards any potential claims, please contact us at dispute@berrysmith.com or 029 2034 5511, or contact Clare Fowler in our commercial dispute team at cfowler@berrysmith.com