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Business Interruption Insurance

On 15th January 2021 the Supreme Court finally handed down its judgement on the legitimacy and application of business interruption (BI) insurance due to the COVID-19 pandemic and, as a result of this, we now urge all businesses who have BI cover for “notifiable diseases”, or similar, to review their situation and potentially make a claim against their insurance provider, as soon as possible.

What is Business Interruption (BI) Insurance and does it apply to COVID-19?

BI insurance generally covers a loss of income in the event that a business cannot carry on as normal. This will typically be offered by insurers for events such as flood or storm damage to your premise.

Some insurers may have also provided cover for “notifiable diseases” also known as “disease clauses” or similar wording, and after a number of claims made by businesses against their insurers were denied, a test case was taken to the High Court and then the Supreme Court to give a final ruling on the validity of the claims.

Which insurers are affected?

The case was upheld against 8 specific insurers and their 12 specific disease clauses and policies, which means that the ruling made by Supreme Court is legally binding on the following insurance providers:

  • Arch Insurance (UK) Ltd
  • Argenta Syndicate Management Ltd
  • Ecclesiastical Insurance Office Plc
  • MS Amlin Underwriting Ltd
  • Hiscox Insurance Company Ltd
  • QBE UK Ltd
  • Royal & Sun Alliance Insurance Plc
  • Zurich Insurance Plc

However, the Supreme Court noted that there may be as many as 700 similar types of policies across 60 different insurance providers for which the ruling could still apply, affecting some 370,000 businesses.

What now?

Following the ruling, the FCA are working with the defendants to close the case and award pay outs against those specific policies.

For other businesses, the FCA will be publishing a Q&A document for affected policyholders and a list of BI policies that come under the umbrella of the Supreme Court ruling.

In the meantime, businesses should check their policies which have been in force during the period of the pandemic and make enquiries of their insurance provider/broker to pursue a claim under the new rulings, if appropriate.

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