These first few months of the year have seen a huge number of headline-dominating events, so much so that it is easy for certain significant developments to fall under the radar.

One such development for business owners has been the recent decision of the UK Supreme Court, in which they substantially allowed an appeal by the Financial Conduct Authority (FCA) on behalf of business interruption insurance policyholders.

Background

The FCA began a test case back in June 2020 on behalf of several small and medium sized enterprise policyholders. They wished to clarify the interpretation of the wording contained in the insurance policies, in the context of the Covid-19 pandemic. The FCA used a sample of 21 types of insurance policies that had been issued by 8 insurers.

In September 2020, the High Court handed down its judgment. They found that the majority of the disease clauses and some of the prevention of access and hybrid clauses contained in the samples provided did in fact provide cover in the context of the pandemic. They also found that the government and public response to Covid-19 i.e. the national lockdown had caused business interruption loss.

The FCA and a number of the insurer defendants appealed the High Court decision.

The purpose of the FCA’s appeal was to determine issues regarding the principle of policy coverage and also causation. The Supreme Court considered the sample insurance wordings in the context of the losses businesses had incurred as a result of Covid-19.

The decision of the Supreme Court

The Supreme Court allowed the FCA’s grounds for appeal and dismissed all of the insurer’s appeals. However, qualifications were attached to two of the four FCA’s appeals.

The Supreme Court focused their attention on the disease, prevention of access, and hybrid clauses contained within the insurance policies.

The Court confirmed that there will be cover under certain disease clauses and they adopted a wide approach to the interpretation of prevention of access and hybrid clauses. The Court found that cover may be available for partial closure as well as full closure of premises. This was especially the case in light of the mandatory closure orders made by the government.

This decision has also helped clarify how losses should be calculated and how the trend clauses contained within insurance policies should be interpreted. The Court made clear it would be for the insurer to decide how much was payable under the policy based on the guidance provided in the judgment. This will help ensure that insurers do not cut down on the cover provided under the policy.

What this means for Business Interruption policyholders

The judgment means that more policyholders will be able to claim against their insurer for a business interruption that has resulted from the Covid-19 pandemic.

Each policy will need to be considered on a case by case basis on its terms and will need to be compared against the detailed judgment of the Supreme Court.

Here to help

If you have any questions regarding your insurance policy, or if this article has raised concerns for you, our hugely experienced Dispute Resolution team at Ansons is here to help.

Please get in touch with Martin de Ridder by email at Martin de Ridder MdeRidder@ansons.law  or call 01543 431186.

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