Supreme Court allows appeal on up to £1.2bn of Covid insurance claims

  • Video report by ITV News Correspondent Martha Fairlie

The Supreme Court has allowed an appeal that could see businesses claim over £1.2 billion from their insurance for coronavirus related disruption.

The Financial Conduct Authority (FCA) last year brought a test case, which could affect around 370,000 businesses, over the wording of business interruption insurance policies, which some insurers argued did not cover the Covid-19 pandemic.

The City watchdog previously said it was bringing the legal action following “widespread concern” over “the lack of clarity and certainty” for businesses seeking to cover substantial losses incurred by the pandemic and subsequent national lockdown.

Thousands of businesses that have seen their income plummet due to the pandemic were left dismayed when their insurers argued the crisis was not covered by their insurance plan.

Many businesses have had to close at sudden notice and pay for costly adaptions to follow Covid guidelines. Credit: PA

Several insurance plans stipulate the business can receive a payout in any circumstance that causes their business to stop operating.

Some insurers had argued that the lockdown meant businesses had lost their customers and had no income, and did not meet the requirements in their insurance plans.

The UK economy has suffered heavily during the pandemic with thousands of businesses large and small going under despite support from the government.

The shrunk again in November by 2.6% after recovering over the summer, pushing the UK into a double-dip recession.

The economy is currently 8.5% smaller than it was in February.

In September, the High Court ruled on several “lead” insurance policies issued by eight separate insurers, largely in favour of the FCA.

The FCA welcomed the judgment as “a significant step in resolving the uncertainty being faced by policyholders”.

However, they cautioned the result “paved the way for many insurance policies to pay indemnities on Covid-19 business interruption claims”, but also “took something away with one hand after giving more substantially and in detail with the other”.

Six of the insurers – Arch, Argenta, Hiscox, MS Amlin, QBE and RSA – also appealed against aspects of the High Court’s ruling, as did the Hiscox Action Group, which represents around 400 businesses insured by Hiscox.

In November, the UK’s highest court heard “leapfrog” appeals – which have bypassed the Court of Appeal – in a case that could have implications for hundreds of thousands of businesses affected by coronavirus.