Business interruption: Supreme Court finds in favour of policyholders

Some insurers have refused to provide cover because they say that the policy is focused on property damage and does not cover their insureds for Covid-19 related business interruption losses. Other insurers argue that their policies cover policyholders for business interruption losses as a result of infectious diseases but do not cover the losses those businesses have sustained as a result of public authority and government imposed closures and restrictions and/or that the notifiable disease occurred outside the area specified in the policy. Many businesses have suffered significant financial strain as a consequence.

The Supreme Court judgment goes some way to resolve some of this uncertainty and provides clarity on most of the issues faced by policyholders on whether their insurers will pay out. The FCA have asked insurers to consider the judgment, to contact their policyholders and to ‘communicate directly and quickly with policyholders who have made claims’. However there maybe plenty of room for potential argument and we see the following as potential stumbling blocks:

• the construction of those particular insurance policies which were not specifically considered by the Court;
• quantum of agreed claims; and
• the extent of the indemnity period under the policies for which insurers must pay out.

If you have suffered business interruption losses as a result of the current pandemic, then we recommend that you take the following practical steps to assess if you have a potential claim or not:

• check your policy(ies) and consider whether there are any that could provide business interruption (BI) cover. Remember to check any extensions to the standard cover.
• If there is BI cover, then notify your insurer of your claim for business interruption losses as a result of Covid-19.
• If your insurer refuses cover, check the basis on which cover is being refused and contact TLT.  We can consider the position and take this up with your insurer directly.
• If cover has been confirmed, consider if there are any issues and/or any disputes about the value of your claim?
• If cover is refused, consider if you have a potential claim against your broker?

Our Commercial Dispute Resolution team 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.

Contributor: Shelley Bishop, Legal Director PSL

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2021. Specific advice should be sought for specific cases. For more information see our terms & conditions