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Court favours claim

Insurers facing payouts after ruling on interruption

shop closed in Covid

Many businesses forced to close may now lodge claims (pic: Terry Murden)

Insurance providers are braced for huge payouts after the High Court ruled some should have paid out to businesses for losses caused by the lockdown.

Judges ruled that clauses in some policies should have meant they were covered for the coronavirus pandemic.

A hearing heard how companies that were forced to shut down because of the pandemic turned to their insurers to cover them for loss of business.

Many insurers rejected the claims, arguing that policies were never meant to cover such unprecedented restrictions.

The Financial Conduct Authority brought the test case against eight insurance companies and the result is likely to affect claims by an estimated 350,000 small and medium sized firms.

The insurers can appeal against the decision. Policyholders should hear from their insurer within seven days.

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Christopher Woolard, interim chief executive of the FCA, said: “We are pleased that the court has substantially found in favour of the arguments we presented on the majority of the key issues.

“Today’s judgement is a significant step in resolving the uncertainty being faced by policyholders.

“Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat.”

He added that the ruling removed “a large number” of roadblocks to successful claims, as well as clarifying those that might not be successful.

Lloyd’s of London, the world’s biggest insurance market, has said it expects up to £5 billion to be paid out in claims related to the coronavirus pandemic.

The insurers that operate in the Lloyd’s market are paying out Covid-19 claims in 16 different insurance areas, mostly related to event cancellations but also medical malpractice, travel cancellations and business interruption.

FSB: ‘do the right thing’

Federation of Small Businesses national chairman Mike Cherry, said:  “This ruling marks a big step forward. It can only be celebrated as a partial victory, however, as it still leaves many with little certainty around whether they will receive pay-outs for policies that have cost them thousands.

“And for many others with standard interruption cover, this judgement will have no bearing.     

Mike Cherry

Mike Cherry: ‘firms acted responsibly’

“The FCA was absolutely right to argue that disease or denial of access clauses within interruption policies should trigger pay-outs in the event of coronavirus-linked disruption. We’re hugely grateful for its work in this space. 

“We echo the regulator’s call to insurers to reflect on the clarity provided by this judgement and do the right thing by policyholders, many of which are fearing for their futures after six months of serious disruption.

“They acted responsibly by taking out these policies, and having them honoured is crucial to encouraging more firms to do the right thing where insurance is concerned. 

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