The UK Supreme Court held it upheld small businesses that are receiving insurance payments to cover losses during the first national lockdown last spring. The ruling means that insurers must pay for a previously described coronavirus business suspension claim, at a total of at least £1.2 billion.
Tens of thousands of companies are expected to make a profit after eight insurers join the lawsuit after it was announced on Friday morning and then announced by the Financial Conduct Authority (FCA). The ruling is set to cost insurance companies hundreds of millions of pounds.
One of the insurers at the heart of the incident is UK-owned Hiscox, who was challenged by 30,000 policymakers in a medium-term pandemic insurance policy. Other well-known defendants include RSA, QBE, Argenta, Arch and Ms Amlin.
In the spring 2020 lockdown, which lasted almost from March to June, many small businesses claimed through business interruption insurance if they had to close, but many insurers made payments. I refused. They argued that there were few policies designed to cover such unprecedented circumstances, and that in most cases they were ineligible.
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The FCA took the issue to court and raised the issue of choice of policy language that effectively excluded small businesses receiving insurance payments during strict lockdowns. The ruling redefines the parameters of what is considered valid claims in the context of the pandemic and sets precedents that could affect 700 policies.
It now covers issues such as whether the business has been denied access to their property and timing of lost revenues regarding closures and tier restrictions.
Lord Briggs, one of the judges who presided over the case, said in the ruling: The policyholder might have needed it the most.
“The results seemed clearly opposed to the spirit and intention of the relevant provisions of the policy in question.”
Huw Evans, Director of the British Insurance Association, said:
“This is a particularly challenging time for many small businesses and we recognize that we naturally regret that Covid-19 restrictions have led to conflicts with some customers.”
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Celebrating the victory, Richard Leedham, on behalf of the Hiscox Action Group, said, “This is a groundbreaking victory for a small group of companies that are undertaken by a huge insurance player and are fully proven.” He commented:
