The widespread disruption and closure of businesses caused by the Covid-19 pandemic has brought into sharp focus the question of available insurance cover for losses under business interruption insurance (“BI”) policies and the extent of that cover.
Many businesses have suffered significant financial losses but frustratingly have found that cover is being refused by their insurer under their BI policy often simply on the basis that the cover does not extend to losses caused by the pandemic. Whilst it is common for BI policies to restrict cover to property damage, there may well be good arguments that cover should be provided by reference to terms which, for example, relate to notifiable diseases and/or denial of access.
In certain cases where TLT have advised, insurers have also unilaterally curtailed agreed indemnity periods, citing reasons such as the phased UK Government lifting of lockdown restrictions.
In a very unusual step the Financial Conduct Authority (‘FCA’) has intervened to bring a test case in the High Court to seek clarity by way of a Court declaration as to the meaning of certain terms in a broad variety of BI policies. The wording of 19 policies taken from 40 insurers have been selected as a representative sample. The case is listed to be heard in late July 2020 and is anticipated to provide clarity for policyholders and insurers albeit it will not deal with how much can be claimed under any particular policy.
The insurers who are involved in the FCA test case are:
In addition to the above named insurers, it is recognised that there are other insurers who will have BI policies which have similar wording and issues. The test case will be binding on the insurers who are a party to the proceedings and will be persuasive for others. If your business has a BI policy, you should prudently consider the following questions:
TLT are currently advising clients on these issues. If you would like advice in relation to any of the above, please contact Craig Thompson or Julien Luke, partners in our Commercial Dispute Resolution team.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions
Beyond BrexitRead more
Business interruption: Supreme Court finds in favour of policyholdersRead more
Business interruption disputesRead more
Transforming the leisure sectorRead more
High Court decision on business interruption claims for Covid related...Read more
Supreme Court hands down judgment in Morrisons data breach claimRead more
Brexit legal risk report 2020Read more
Court of Appeal hands down judgment in Morrisons AppealRead more
Retail Risk Report 2018Read more
Helping you navigate your business through the risks and opportunities that Brexit will bring.Read more
The way people shop is constantly evolving, from the growth of online and the changing use of stores...Read more
The widespread disruption and closure of businesses caused by the Covid-19 pandemic and the subsequent national and local lockdowns has brought into sharp focus the question of available insurance cover for losses under...Read more
Watch our video series for information on the legal issues that are affecting the real estate sector. Each...Read more
The pandemic has had a deep and long-lasting effect on the leisure, food & drink sector, forcing operators to embrace new ways of attracting and servicing customers.Read more
The pandemic has forced the majority of the workforce into a world of remote working. As a result, our cities are evolving.Read more
Our countdown to Brexit and beyond podcast series looks at the impact for businesses on both sides of the pond of any free trade agreement between the UK and Europe and the UK and the US. ThisRead more
There's a growing demand for retailers to do more to attract the Purple Pound – the collective spending power of disabled shoppers, estimated to be worth around £274bn. We look at the opportunities, the legal issues and...Read more
Green finance is gaining speed, driven by global climate change pressures and the recognition of the vital role which sustainability plays in a resilient financial services sector.Read more
Advising on complex and reputationally sensitive matters involving litigation, arbitration, mediation and debt recovery.Read more
Our team provide practical, commercial solutions ranging from advice in the first stages of a disagreement through to court proceedings and enforcement.Read more