The Supreme Court delivers a landmark judgment that may impact thousands of business interruption insurance claims relating to COVID-19 losses

Key takeaway from the Supreme Court’s ruling

In a major boost to insurance policyholders, the Supreme Court has delivered a landmark judgment that paves the way for thousands of policyholders to claim insurance pay-outs for losses suffered as a result of the COVID-19 pandemic.

Background to the Supreme Court’s judgment

Business interruption insurance policies traditionally cover losses suffered by a business from unexpected events, such as damage to property. These policies can also be extended to cover specified events including, for example, the occurrence of a disease. Following the first wave of the pandemic and the national ‘lock-down’, many businesses tried to claim for their pandemic-related losses under their business interruption insurance policies. In response, certain insurers denied cover on the basis that the policies did not cover such losses.As a result of the uncertainty in the market, the Financial Conduct Authority (FCA) brought, on behalf of policyholders, ‘test case’ Court proceedings for a legal ruling on whether certain policy wordings covered losses resulting from the pandemic. On 15 September 2020, as we reported here, the High Court provided its ruling, although both the FCA and certain insurers appealed the ruling to the Supreme Court. For further details of aspects of the claim considered by the High Court, please see here:

• Coronavirus: Business Interruption Insurance FAQs
• Business Interruption Insurance and COVID-19
• Business Interruption Insurance: FCA sets out how insurers should be handling Coronavirus claims and complaints

What did the Supreme Court decide?

The Supreme Court considered whether 21 representative sample policy wordings covered losses suffered by policyholders as a result of the pandemic. These policy wordings related to, in particular, “disease clauses”, “prevention of access clauses”, “hybrid clauses” and “trends clauses” that typically feature in, or are optional extensions to, business interruption insurance policies.The Supreme Court found mostly in favour of the FCA, and therefore policyholders, with 14 of the 21 types of insurance policy potentially providing policyholders with cover from losses suffered as a result of the pandemic. In particular, the Supreme Court ruled that “disease clauses” covering notifiable diseases will provide cover to policyholders and that “prevention of access” and “hybrid clauses” should be interpreted broadly.The policy wordings considered by the Supreme Court were representative, with the ruling likely to also affect other policies that were not considered but have identical or similar wording. The FCA has estimated that 370,000 policyholders may be affected by the Supreme Court’s ruling, with 700 types of insurance policies issued by 60 insurers likely to be subject to the ruling.

How do I make a claim under my business interruption insurance policy?The FCA has confirmed that it “will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible”.Whilst the Supreme Court’s ruling is a major boost to many policyholders, particularly as it comes in the midst of a third national ‘lock-down’, it is important to emphasise that the ruling provides helpful guidance only – whether a particular insurance policy provides cover for losses resulting from COVID-19 will still need to be considered on the wording of the policy itself, against the facts and in light of the Supreme Court’s ruling.

We have a specialist team that are currently advising a number of policyholders on making claims against their business interruption insurance policies. For advice on your business interruption insurance policy, please contact Richard Coates or Louise Wilson.

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If you would like to talk through the consequences for your business, please email us and one of our team will get in touch.