Success For Businesses In Supreme Court Judgment Regarding Business Interruption Insurance
In December 2020 we reported on the litigation between the Financial Conduct Authority (FCA) and various insurers concerning the interpretation of business interruption insurance policies. The High Court had given a judgment that was broadly in favour of the insured businesses, holding that insurers had been attempting to interpret their own policies too narrowly and making it too difficult for business to make claims.
However, the Court did not decide entirely in the FCA’s favour and so the FCA and many of the disappointed insurers appealed. Given the importance to businesses and insurers alike, the appeals were fast-tracked to the Supreme Court which handed out a series of judgments on 15 January 2021.
Happily for businesses, the Supreme Court has largely upheld the FCA’s arguments and rejected those of the insurers. Significantly, the court decided that whilst businesses would have to show that there was an occurrence of Covid-19 within any geographical area specified in the policy, the business did not have to show that that occurrence was the one which caused the business to suffer financial loss. Rather, all occurrences of Covid-19 were equal causes of the restrictions imposed by the government.
The Supreme Court also considered how losses should be calculated. Usually, this is by reference to the previous year’s trading. The court clarified that where adjustments are made to the previous year’s figures, no allowance should be made for circumstances connected to the Covid-19 pandemic, for example a slow-down in trading before the actual interruption took place.
Whilst the decision is undoubtedly good for businesses, it remains the fact that there are countless different policies which may differ slightly from those considered by the Supreme Court. Every business is different and each business still has to prove that the restrictions imposed by the Covid-19 pandemic interrupted the business and caused financial loss.
Hopefully, insurers will prove to be receptive to working alongside the insured businesses in order to provide much needed financial relief. However, if you would like a review of your policy or help with proving and recovering your losses, please contact Matthew Ellis, one of our specialist commercial litigation lawyers. To reach him, please email: matthew.ellis@GAsolicitors.com or call 01752 203500 and he will be happy to assist.