Supreme Court rules on insurance payouts
15 Jan 2021
Following a Supreme Court ruling earlier today (Friday 15th January 2021), tens of thousands of small businesses will be able to receive insurance payouts covering losses from the first national lockdown due to Covid-19.
For some businesses the ruling could provide a lifeline, allowing them to trade beyond the coronavirus crisis; it could cost the insurance sector hundreds of millions of pounds.
The City watchdog, the Financial Conduct Authority (FCA), brought the fast-tracked test case, with eight insurers agreeing to take part in proceedings. One of the insurers in line to make significant payouts is Hiscox, which was challenged by 30,000 policyholders as part of the case.
Following the ruling, a formal statement from Jewellers Block insurer TH March states,
The Supreme Court has today provided its ruling regarding the FCA Test Case on business interruption cover as a result of the COVID-19 pandemic. This only applied to a relatively small number of policy wordings being used in the UK Insurance market, so for the vast majority of policyholders, it is unlikely to change matters. However, there is no doubt that all insurers will now digest the verdict and respond to their policyholders accordingly.
TH March will, of course, continue to engage and liaise with our clients’ insurers on this matter.
The small businesses made claims through business interruption policies for loss of earnings when they were forced to close. However, many insurers refused to pay, arguing that only the most specialist policies had cover for such unprecedented restrictions.
A selection of policy wordings were tested in court, setting the criteria for what would be considered a valid claim ands the decision could potentially affect 370,000 small businesses. The FCA, the insurance sector, and the Financial Ombudsman will all use the judgement to guide their decisions in other cases.
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Source: The National Association of Jewellers