The Financial Conduct Authority brought a test case to clarify issues surrounding Business Interruption Insurance for those policyholders affected by COVID-19. Earlier this year the Supreme Court substantially allowed the FCA’s appeal, bringing clarity to the policyholders.
Most policies are focused on property damage and only have basic cover for business interruption as a consequence of property damage. However, some policies also cover business interruption from other causes, in particular infectious or notifiable diseases (‘disease clauses’) and prevention of access and public authority closures or restrictions (‘prevention of access clauses’). In some cases insurers accepted liability under these policies; whilst in other cases they disputed liability.
On the FCA’s appeal, the Supreme Court ruled that insurance cover may be available for partial closure of premises, as well as full closure, and for mandatory closure orders that were not legally binding; and that valid claims should not be reduced because the loss would have resulted in any event from the pandemic. This will mean that more policyholders will have valid claims and some pay-outs will be higher.
Each policy needs to be considered against the detailed judgment to work out what it means for that policy. If you are unsure of how this affects you, we suggest that you approach your insurance broker or the insurer.