The insurance industry is expected to pay out £1.8billion in Covid-related claims after the Supreme Court confirmed when claims should be paid out.
The Covid pandemic saw many businesses close their doors; many of them tried to claim through their non-damage business interruption insurance policy clauses for loss of earnings, but found that insurers closed their doors on the claims.
With an estimated 700 types of policies across 60 different insurers held by 370,000 small to medium businesses affected, the matter found its way into the courts. The insurers’ regulator, the Financial Conduct Authority (FCA) brought the proceedings in order to clarify key issues of contractual uncertainty for policyholders and insurers alike, particularly in relation to policy coverage and causation.
A question of interpretation
The case turned on the wordings of business interruption policies with clauses offering ‘prevention of access’ cover when insured premises cannot be accessed because of public authority restrictions, cover for diseases in the event of a notifiable disease within a specified radius, and hybrid clauses triggered by the action of a government authority intervening to close a business or prevent access to it linked to a notifiable disease from that premises or around it.
The insurers as defendants lost all but four of the claims brought by the FCA back in September; the Supreme Court has now unanimously dismissed the insurers’ appeals. This leaves the insurers with a large legal bill and a significant number of claims to process. Not all those claims will be paid, of course, but for many small enterprises the settlements could determine whether or not they survive. For some it might already be too late.
The FCA has said it will work with insurers to ensure they settle claims quickly, encouraging them to make interim payments if possible given that the judgment removes many of the ‘roadblocks’ to claims.
If you submitted a non-damage business interruption claim as a result of last year’s lockdowns, you should expect to be notified soon by your insurer as to whether your claim is valid. Of course many policies will have been amended for new and renewing customers since the pandemic began, so losses from Lockdown 3.0 will probably have been anticipated and addressed in those policies; doubtless many will exclude the current (and future) pandemic from cover.