Following lockdown, a host of businesses had to close and many looked to insurers to cover their losses.
But many insurers disputed the claims, arguing policies were never meant to cover such unprecedented restrictions.
The test case was brought by the Financial Conduct Authority and had the potential to affect 370,000 mostly small businesses.
The insurers can appeal against the decision. Policyholders should hear from their insurer within seven days.
“Today’s judgement is a significant step in resolving the uncertainty being faced by policyholders.
“Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat.”
The Judgment handed down in the FCA’s case on Business Interruption Policies has now changed the game for both, insurers and businesses.
Under the new ruling many businesses that suffered losses (some substantial) due to COVID-19, will be able to make and claim under the Business Interruption part of their insurance policy.
This is because the court ruled that the ‘disease’ and/or ‘denial of access’ clauses in some business interruption policies should have meant they were covered.
As with all court decisions of this kind, the wording of each policy could lead to different outcomes, so there are still likely to be insurers who reject claims made by their insured where the wording of the policy does not match the wording of the policies considered by the court when making its determination.
As the long term effect of this decision. There will still be some litigation over policies with certain wording, and I suspect insurance premiums may be increased going forward (someone has to pay for all these claims!).
If you have any questions on the above or litigation in general, please contact Michael Shapiro, Head of GSC’s Commercial Litigation & Dispute Resolution, directly on: [email protected] or 0207 822 2246.
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