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Why your business interruption insurance could now pay out – good news from the High Court

Some businesses, previously told their insurance did not cover them for a pandemic, should have been paid for losses caused by lockdown, the High Court has ruled.

It is welcome news for thousands of struggling firms which say they were wrongly denied cover for the virus and could go bust as a result.

The test case was brought by the Financial Conduct Authority (FCA) after 400 companies complained. It argued that while some insurers had provided pay-outs to business customers, many claims had been rejected under ‘blanket denials of cover’.


Welcoming the decision, Christopher Woodland, the FCA’s interim director, said: “Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible, and today’s judgement removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful.”

What does this test case mean?

The test case looked at a sample of 21 business interruption policies provided by a group of insurance companies which all volunteered to take part. These included Hiscox, RSA Group, Arch Insurance and Argenta.

In particular, the court examined how Denial of Access and Notifiable Disease extensions were interpreted in relation to Covid-19 claims against insurance policies.

Who does it affect?

The ruling means that for some policyholders there is progress towards the pay-out they always believed they were entitled to.

The downside is that it does not apply to everyone and there may be a long wait before any money changes hands.

In addition, the insurers may appeal against the court’s decision creating a further delay.

How do I know if I am owed a payout?

The FCA says that every policy will now need to be considered against the detailed High Court judgement to see what it means for individuals.

Businesses should hear imminently whether their insurer has to pay for losses caused by lockdown. The FCA says it expects insurers to write to policyholders within seven days of the High Court hearing held on 15 September, 2020.

Further information

To see what we recently wrote on this topic, click here.

Get in touch

For further advice on Business Interruption claims and related issues, please contact Commercial Disputes Partner James Taylor at james.taylor@wards.uk.com or Solicitor Richard Darbinian at richard.darbinian@wards.uk.com.

Or click here to view Wards’ acclaimed Business Disputes team.

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