Small firms' relief following Supreme Court’s interruption insurance verdict

  • 15 Jan 2021

Some businesses should be covered by their insurance for losses caused by coronavirus lockdowns, the UK Supreme Court has ruled, in a test case brought by the industry regulator against major insurance companies.

Small businesses had warned they faced ruin after attempts to claim compensation for business losses during the pandemic were rejected by insurers.

Six of the world’s largest commercial insurers - Hiscox, RSA, QBE, Argenta, Arch and MS Amlin - said many business interruption policies did not cover widespread disruption after the UK's first national lockdown last March.


But senior judges said many payouts should be triggered after scrutinising non-damage insurance policy clauses, which cover disease, denial of access to business premises and hybrid clauses.

The Financial Conduct Authority (FCA) said it would be working with insurers to ensure they quickly settled claims they were now required to pay and to make interim payments if possible.

The FCA took insurers to court last June in a case expected to have ramifications for 370,000 policyholders, 60 insurers and billions of pounds in claims because many policies have similar wordings. 

Commenting on the Supreme Court’s decision to rule in favour of policyholders, Federation of Small Businesses (FSB) National Chair Mike Cherry said: “Today’s judgement is a big victory. It cements the high court’s decision to grant businesses left on the brink the insurance pay-outs they are rightfully owed. For many, it has been a long and difficult road to get to this stage so this will bring clarity and hope to the thousands of firms which have been left in financial limbo for almost a year.

“While this is good news, and while the law has to follow procedure, it’s disappointing that so many small businesses have had to wait to get the money they desperately need under policies they believed were there to protect them, policies they bought in good faith.


“Businesses deserve to be protected in a timely way, but instead they have been failed by their insurers and are now trying to make up for lost time. Providers must now pay-out quickly, and consider the steps they can take to progress these claims in a swift and seamless manner. Any paperwork required of claimants shouldn’t be onerous or time-consuming. 

“Small businesses contribute trillions to the economy. The Financial Conduct Authority (FCA) was right to argue that disease or denial of access clauses within interruption policies should trigger pay-outs in the event of coronavirus-linked disruption. We are hugely grateful for its work in this space.”

You can read more about this from FSB Insurance Service here.


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