What now for business interruption claims following the Supreme Court Test Case?
There has been much uncertainty over the validity of business interruption claims due to the Covid-19 pandemic. Kelvin Farmaner explains the outcome of the recent Supreme Court Judgment.
Many businesses have taken out business interruption insurance each year in order to protect them in the event that there is some disruption to the conduct of their business. The current coronavirus pandemic is of course an unprecedented disruption to many businesses. As a result many businesses have claimed on their policies and there has been general uncertainty as to whether those policies provide cover.
What did the Judgment find?
Earlier this year the Supreme Court gave Judgment in a test case on this issue. The idea was that by fast tracking a test case to the Supreme Court this might help to clarify the many thousands of other cases going through the system.
The Judgment is somewhat complex, running to over 100 pages. As ever the devil is in the detail. Many policies deal with damage to property, with only basic business interruption cover linked to property damage. However, other polices are wider and provide for business interruption cover as a result of a notifiable disease within a specified distance of the business premises (“disease clauses”) and prevention of access to or use of the business premises due to public authority intervention (“prevention of access clauses”).
The Court decided that in many cases these clauses will provide cover for business interruption losses resulting from COVID-19. The Court also went on to provide some guidance on the vexed issue of causation, or what connection must be established between the insured peril and the losses sustained.
The Financial Conduct Authority (FCA) has encouraged insurers and brokers to work constructively with policyholders to resolve claims as swiftly as possible following the Supreme Court guidance.
What should I do next?
Anecdotally, it seems there is still some uncertainty around what can or cannot be claimed notwithstanding the laudable attempts of the FCA and the Supreme Court to bring as much clarity to bear on these issues as possible. Each policy will need to be considered against the detailed judgment to work out what it means for that policy. Policyholders should expect to hear from their insurers or brokers and if questions remain they should be directed to the insurers and brokers in the first instance.
Trethowans would be happy to assist any parties impacted by these issues and in need of further guidance and assistance. Kelvin Farmaner is a Partner and Head of the Insurance & Regulatory team and can be contacted on 023 8032 1000 or by email to email@example.com.