The rise of the day brought with it a new lease of life for many small businesses and promises a new prospect of hope for many in a great time of need. On 15 January 2021, the Supreme Court delivered a landmark ruling in relation to Business Interruption (“BI”) claims. This landmark victory resoundingly found in favour of small-to-medium businesses and comes as welcome news to existing policyholders seeking to rely off business interruption insurance policies, perhaps the almost perfect start to the new year.
As a result of the COVID-19 emergency measures implemented by government in March 2020 many policyholders were forced to cease trading. Hoping to indemnify their losses, they sought to rely upon existing BI insurance policies. Many policyholders had their claims rejected by insurers given the unprecedented situation, creating a cloud of uncertainty and unease. To combat such issues, the Financial Conduct Authority (“FCA”) brought out a Test Case in the hope of providing clarity. The test case was broadly good news for policyholders as it recommended that insurers should be held to strict obligations with regard to such policies and in fact pay out to many businesses in circumstances which had previously been denied.
Today, the joyous cheers and virtual hugs of many small business owners can be felt all around as the final ruling sets a new precedent. This ruling offers clarification on the FCA Test Case. Small businesses can “breathe a sigh of relief”, as many will now be entitled to receive insurance pay-outs in the form of compensation to cover losses accrued over the first national lockdown, where insurance companies had previously refused to pay out. The ruling gives guidance to a potentially staggering 370,000 small businesses trying to navigate their way through COVID-19 with the claims thought to be worth at least £1.2bn
The court determined that many small-to-medium businesses could make claims through BI insurance policies for loss of earnings. They also contended that to deprive policyholders to do so was ‘entirely contrary to the spirit and intent of the relevant provisions of the policies in issue'.
What the judgment means for policyholders
There is light at the end of the tunnel for many policyholders after what has undoubtedly been a long and strenuous road. For many businesses, it extends a lifeline, allowing them to continue trading far beyond COVID-19. The court's decision grants businesses left on the edge of insolvency, insurance pay-outs that are rightfully due. With many businesses and jobs relying on this verdict, it can now be said that the parameter for valid BI claims has been set. This ruling highlights the importance of offering protection to small businesses and is the first major step in protecting their needs.
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