A test case has begun this week brought by the Financial Conduct Authority (FCA) against eight insurers for Business Interruption insurance
A highly contested case surrounding insurance payouts for small businesses who were unable to trade owing to lockdown is now before the Supreme Court.
At the beginning of the pandemic the vast majority of insurers who provided disease and non-damage extensions to their business interruption wordings denied claims submitted in relation to COVID-19 under these extensions. However, following expedited proceedings brought by the FCA under the Test Case regime to the High Court, the court rejected the causation arguments raised jointly by insurers and found largely in favour of policyholders in relation to the sample wordings it considered.
Supreme Court judges will make a final judgement after the hearing, which is expected to last four days.
The issue will have had implications for 370,000 – mostly small – businesses, and involves potential payouts of £1.2bn.
High Court judges earlier found mostly in favour of insurers having to pay out to policyholders regarding a selection of policy types. Some of these decisions are now being appealed against at the Supreme Court.
Andrew Lund-Yates, who runs The Old New Inn in Cheltenham said: ‘The insurers really don’t seem to know the problems they’ve caused.
‘My elderly father tried to send me his life’s savings to help the business get through the pandemic, but the payment was intercepted by a fraudster and now it’s all gone.
‘None of this would ever have happened if insurers had just paid out.’
Michael Kill chief executive officer of the Night Time Industries Association (NTIA) said : “the night-time economy and hospitality sector has been decimated by the impact of Covid 19, not least by the behaviour of insurance companies and their management of business interruption claims since the closure of many businesses due to the pandemic. We are now at the final hurdle with the FCA supreme court appeal hearing this week and can feel an immense amount of frustration and anger from businesses at the insurance companies that have utilized this process, although expediated to elongate the potential outcome.”
“It has to be said you can only feel this tragedy by insurers will purposely see many businesses close without seeing their claims fulfilled, bringing into question the integrity of the insurance sector”