Small firms have been thrown a lifeline by Supreme Court ruling
Lord Hamblem the Supreme Court judge said the court accepted the arguments from representatives of policyholders and dismissed appeals from insurers against an earlier judgement finding in policyholder’s favour, covering issues such as disease clauses, whether business was denied access to the properties and the timing of lost earnings.
Following a Supreme Court ruling which could cost insurance sector hundreds of millions of pounds, tens and thousands of small businesses will receive insurance payments covering losses from the first national lockdown from their business interruption insurance policies. For some, this could provide a lifeline permitting them to trade beyond the coronavirus crisis.
Several ranges of firms including pubs, cafes, wedding planners and beauty parlours argued they faced ruin when they were turned down by insurers for business interruption policy claims on losses caused by the first national Covid-19 lockdown.
The Financial Conduct Authority (FCA) brought the test case with eight insurers agreeing to take part in proceedings. Hiscox, one of the insurer was challenged by thousands of its policyholders as part of the case. Huw Evans director general of industry group the Association of British Insurers responded: “ Insurers have supported this fast-track legal process every step of the way and we welcome the clarity that the judgement will bring to a number of complex issues. The insurance industry expects to pay out over £1.8bn in Covid-19 related claims across a range of products including business interruption policies”.
Hiscox shares were trading more than 4 per cent down after the ruling.
Richard Leedam who acted as the Hiscox Action Group on behalf of small businesses said: “ This is a landmark victory for all small group of businesses who took on a huge insurance player and have been fully vindicated”. Arch, Argenta, MS Amlin, OBE and RSA were the other world’s largest commercial insurers involved in the test case. The legal process was fast-tracked to the highest court in England and Wales which rejected the insurer’s arguments and said it had substantially allowed the appeal brought the FCA and an action group to clarify the position.
AS many insurers refused to pay for claims made by small businesses for business interruption due to lockdown, arguing only the most specialist policies had cover for such unprecedented restrictions.
The ruling provides guidance for a wider pool o f700 policies, potentially affecting 370, 000 small businesses.
Sheldon Mills from the FCA said “Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. Today’s judgement decisively removes many of the roadblocks to claims by policyholders. We will be working with insurers to ensure that they now move quickly to pay claims that the judgement says should be paid, making interim payments wherever possible.”
The FCA, the insurance sector, and the Financial Ombudsman will all use the judgement to guide their decisions in other cases.