During the coronavirus pandemic, many businesses have suffered financially, with many turning to their Business Interruption Insurance Policies to seek cover. Throughout the pandemic, many insurers took the stance that their policies did not cover businesses for the purposes and effects of COVID-19, which has resulted in a court battle between the Financial Conduct Authority (FCA) and several insurance companies when the FCA chose to test a selection of policy wording in court. The arguments from both the FCA and the insurers were heard in November 2020. On the 15th of January 2021, the Supreme Court handed down its judgment on the test case brought by the FCA and substantially allowed the appeals of the FCA and dismissed the appeals brought by the insurers (FCA v Arch Insurance (UK) Ltd and others  UKSC 1).
Amongst other things, the Supreme Court considered the wording of policies in relation to disease and, in particular, where there is a notifiable disease within a specified geographical location. Given the extent of COVID-19, the Supreme Court, in considering the causation of loss, ruled that at the date any measures introduced by the Government which may have affected business, it would be sufficient to show that there was at least one case of COVID-19 within any required radius under a relevant policy. The Supreme Court also took a wide view of the ‘prevention of access and hybrid clauses’ ruling that some general measures, such as instructions given by the Prime Minister, may satisfy the requirements of the policies even if they were not enforced by law at the time.
So, what does this mean for business? This means that insured businesses whose insurance clauses were considered in relation to the appeal will, in principle, be provided with business insurance cover for the effects and losses resulting from the coronavirus pandemic. There may also be an impact on the amount which is paid out by insurers under those policies. Policies which have been entered into or renewed more recently, and indeed since the issues emerged on the clause wording, will likely clearly state whether the effects of COVID-19 are covered by the policy.
As a result of the ruling by the Supreme Court, the FCA is working with insurers to ensure that payments are made to businesses. This may be a lifeline to many small businesses who have felt the financial effect of the pandemic.
If you are a business owner and would like to speak to a member of our dispute resolution team, contact Richard Dobson Mason at email@example.com or contact our office on 01457 761 320.