In July, we reported on the Covid-19 business interruption test case brought by the Financial Services Commission with the agreement of eight insurers, to establish whether the wording of 17 business interruption insurance policies allow for claims as a result of the restrictions brought in to contain the Covid-19 pandemic.
Today, the High Court handed down its judgment on that case, finding in favour of the majority of policyholders. This will open the door to a large number of claims from businesses that had to shut down during lockdown. The regulator said the value of the policies affected was around £1.2 billion.
The majority of business interruption insurance policies are designed to cover damage to property such that a business is unable to trade from the property in question. However, some policies may contain clauses providing additional protection for business interruption in the following circumstances:
- Disease – a notifiable disease within a specified vicinity of the property in question;
- Prevention of access – a prevention or hindrance of access as a result of government or local authority restrictions; and
- Hybrid clauses – restrictions imposed by government or local authority as a result of a notifiable disease
The Court held that most of the disease clauses considered provide cover and some of the denial of access clauses also provide cover. Much will depend on the individual wording of a policy and the particular circumstances of the business interruption, for instance, whether a particular business was ordered to close or chose to do so. It will also depend on the extent to which the business was interrupted, for example, some restaurants already offered takeaways so that aspect of their business was able to continue. The test case also clarified that the Covid-19 pandemic and the government restrictions were a single cause of the covered loss, which is key to a successful claim.
The test case has now opened the door for businesses with particular policy wording to make a claim against their insurers for business interruption. Anyone who has business interruption insurance is advised to check the wording of their policy carefully to establish whether it falls within the scope of the test case. However, the judgment does not provide policyholders with carte blanche to make claims and the terms of each policy will need to be carefully considered.
The ruling may well be subject to appeal but that should not affect the determination of claims in the meantime.
Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful.