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For example, they face the temporary closure of factories due to outbreaks of the disease among workers, disruption to supply chains. Many have also dealt with a drop in demand as restaurants, cafés and other hospitality venues are forced to limit their service offering or close completely. 

The business interruption (BI) insurance test case was brought in June 2020 by the Financial Conduct Authority (FCA) on behalf of mostly small and medium sized businesses. These include hospitality venues, which have suffered heavy financial losses as a result of the pandemic and the public health measures taken. 

Most policies usually only provide basic cover for BI as a result of property damage. But, the policyholders in this test case had taken out BI cover with certain non-damage clauses, such as disease clauses and prevention of access clauses. Some insurers accepted liability and some disputed it, and so the test case was brought to provide clarity and certainty.

Supreme Court judgment

The High Court’s ruling was a resounding victory for policyholders. The recent Supreme Court judgment has broadened the circumstances in which losses may be recovered, for example where premises are only partially closed. The findings overall mean that more policyholders will have valid claims and some payouts will be higher. 

Importantly, while the test case considered a representative sample of standard form BI policy wordings, it is estimated that 700 types of policies across over 60 different insurers and 370,000 policyholders could potentially be affected by the outcome. 

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