COVID-19, the government imposed ‘lockdown’, ongoing restrictions and the continued increase in infection levels have resulted in huge disruption for businesses resulting in substantial financial loss as well as permanent closures. For some, knowing their business had business interruption cover was of some reassurance and since March, thousands of business owners submitted claims for business interruptions only to have these rejected by Insurers, leaving some business owners facing serious financial problems and concerned for the future of their business.
As a result of the high number of claims being rejected by insurers in the initial lockdown period, the Financial Credit Authority (FCA) sought clarity on the interpretation of business interruption clauses and the implementation of these clauses by insurers. The FCA issued proceedings in the High Court in June seeking clarity in respect of all issues; eight insurance firms were party to the case which concerned 21 sample policies, affecting 370,000 policyholders.
The case was heard in the High Court at the end of July with a lengthy judgment exceeding 150 pages published on 15 September.
The Court found in favour of policyholders on the majority of the key issues contested, resulting in the FCA encouraging insurers to reassess and settle claims quickly in order to support business and consumers.
That said, the test case is not the answer to all possible disputes, nor does it confirm how much is payable under individual policies, but it provides a guide to insurers and policyholders alike on how these insurance policies now will operate. Likewise, the judgment does not mean that all of the involved insurers will pay out on all claims submitted under the relevant policies. Each policy will now be considered in light of the judgment individually.
Following the judgment, the FCA and the eight party Insurers commenced work to reach an agreement on a range of issues in an attempt to avoid appeal in order that payments might be made on eligible claims as soon as possible. However, the FCA has filed a ‘leapfrog’ application to appeal to the Supreme Court on a precautionary basis in the event an agreement is not reached by 30 September. The matter is before the Court once more on 2 October for a Consequentials Hearing whereupon the Court will hear submissions from parties on any applications for appeal and hopefully there will be some welcome clarity for business owners.
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