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Court ruling

Small firms to share £1.8bn in Covid insurance claims

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Firms claimed after being forced to shut

Thousands of small firms expect to share £1.8bn in insurance payouts after a legal ruling on business interruption caused by the Covid lockdown.

The Supreme Court has found in favour of small firms receiving payments from business interruption insurance policies.

The ruling will provide a lifeline for struggling firms, allowing them to trade beyond the coronavirus crisis and could be worth £100m to Scottish businesses alone.

Andrew McRae, the Federation of Small Businesses (FSB) Scotland policy chairman, said: “While this is good news for many smaller firms in Scotland, it is of great concern that it has taken a decision from the courts to get insurers to pay out on policies which responsible business owners bought in good faith. 

“This victory for small businesses could deliver more than a £100 million boost for Scotland’s independent and local firms. But to save many operators that are already on the brink, we need to see providers pay out quickly. After a nightmare year, we can’t see the insurance industry drag their heels.”

Many insurers had refused to accept claims from firms which made business interruption claims when the first lockdown was imposed. An estimated 370,000 companies are said to be affected by the dispute.


Insurers argued that only the most specialist policies had cover for such unpredictable restrictions.

A test case, setting the parameters for what would be considered a valid claim, was brought by the Financial Conduct Authority (FCA) with the support of eight insurance companies last summer.

The Supreme Court today said that it had “substantially allowed” the appeal to clarify the position.

Huw Evans, director general of the Association of British Insurers, said: “Insurers have supported this fast-track legal process every step of the way and we welcome the clarity that the judgment will bring to a number of complex issues. Today’s judgment represents the final step in the appeal process.

“The insurance industry expects to pay out over £1.8bn in Covid-19 related claims across a range of products, including business interruption policies.

“Customers who have made claims that are affected by the test case will be contacted by their insurer to discuss what the judgment means for their claim. All valid claims will be settled as soon as possible and in many cases the process of settling claims has begun. Some payments have already been made where valid business interruption claims have not been impacted by the test case ruling.

“We recognise this has been a particularly difficult time for many small businesses and naturally regret the Covid-19 restrictions have led to disputes with some customers. We will continue to work together as an industry to ensure customers have the clarity they need when it comes to what they can expect from their business insurance policies.”

Richard Leedham, partner at Mishcon de Reya who represents the Hiscox Action Group said: “We are glad that the Supreme Court has found that the vast majority of policyholders of non-property damage business dnterruption (BI) cover will have cover for their business interruption losses caused by the national response of Government to COVID-19.

“This includes most of the members of the Hiscox Action Group, whom we represented in the case, and RSA and now all QBE policyholders whom we represented at first instance through my partner Sonia Campbell and Hospitality Insurance Group Action.

“The Supreme Court has recognised that, just when this cover was needed most by thousands of UK businesses, insurers were wrong to argue that coverage was applicable only if there were narrow local restrictions, that they could deny claims because the  cover had not been intended to be provided and/ or because the interruption and therefore losses would have happened in any event.

“The judgment should be a massive boost to all businesses reeling from a third lockdown who can now demand their claims are paid. 

“The hope and expectation of our clients is that the claim adjustment process starts immediately and that insurers will not continue to cause further distress by further unnecessary delay.”  

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