Business interruption insurance and COVID-19
On 23 March 2020 the prime minister gave what was, on the face of it, a simple instruction to the British people: “you must stay at home”. Whilst the instruction had for some time appeared inevitable, it was nevertheless a draconian curtailment of civil liberties and of people’s social and economic rights.
It meant that many business owners simply were not allowed to trade as they had the day before. Their doors were literally closed to customers. The government provided unprecedented financial assistance through the furlough scheme, bounce back loans, tax reliefs and grants. Many businesses dusted off their insurance policies and sought to make claims for lost earnings under the business interruption provisions.
A business interruption insurance clause can give the business the right to make a claim on the insurance policy where the business has not been able to operate because of a certain event. The event has to be defined in the policy. Relevant examples are an outbreak of a disease within the vicinity of the business, or an order by a local authority that the business should close for public safety.
Given the vast scale of losses caused by the pandemic, insurers are not keen to pay-out unless they have to and have argued that the business interruption insurance policies should be very narrowly interpreted. Businesses which relied on the outbreak of a disease to make a claim found their claims rejected because, the insurer said, it was not the disease that closed the business but government action seeking to prevent the spread of the disease. Others were faced with the argument that the UK government was not a competent local authority, or that ‘vicinity’ meant that the disease should be present on the business premises.
Anxious to avoid a litigation free-for-all, the Financial Conduct Authority brought a test case against some insurers so that there could be a consistent interpretation of their business interruption insurance policies. The High Court gave a broadly favourable judgment for businesses in a victory for common sense. Unsurprisingly, an appeal was fast-tracked to the Supreme Court where the hearing took place (virtually). Commercial litigation lawyers are hoping that the Supreme Court will be able to give its judgment in record time, to provide reassurance, given the importance of business interruption insurance to so many businesses.
In the meantime, it is worthwhile checking your policies to see whether you have business interruption insurance which may apply to your business because of the pandemic. If you do, we’d strongly recommend informing your insurers if you wish to make a claim on your business interruption insurance as a result of a loss or decline in business from COVID-19.
As obvious as it may be, not all policies are identical and every business is different. However, if you are in any doubt on whether or not you are covered by business interruption insurance, or if the insurer refuses to pay out for this, please contact Matthew Ellis, one of our commercial litigation lawyers. To reach him, please email: matthew.ellis@GAsolicitors.com or call 01752 203500 and he will be able to assist you.