The High Court in England yesterday gave its judgment in the COVID-19 Business Interruption Insurance test case of The Financial Services Authority v. Arch and Others.
Businesses with business interruption insurance policies should be hearing from their insurers over the next week or so with details about how the decision affects their individual policy.
The court ruled on the interpretation of 21 sample insurance policies. The decision was largely favourable to insured clients, as opposed to insurers, and many of the insurers’ arguments against paying on business interruption insurance policies were rejected. But it does not mean that insured clients will definitely receive an insurance pay out. Each insurance policy depends on its exact wording.
The matter is complicated. Broadly, the insurers lost arguments denying paying on insurance in respect of “disease” or “prevention of access to business due to Government action in the light of an emergency”. This may make it more likely that insurers will start to pay out on business interruption insurance.
This should be welcome news for businesses looking to claim under their business interruption policies. But not all businesses were affected equally by the pandemic, and the judgment reflects that losses will be heavier for, say licensed trade businesses than, say, essential retailers.
In addition, we expect that insurers will appeal some or all of the High Court’s decision. So businesses may still be some way off receiving payments under their policies.
And even if those appeals are not successful, how insurers actually deal with businesses will depend on the exact policy wording of the individual policy, the type of business being operated and the magnitude of the effect of COVID-19 on that business.
So while good news for insured businesses, this is potentially just a first step on a long road to recovering under the policies.
If you would like further information on the topic discussed in this article, please contact Andrew Fleetwood by email: firstname.lastname@example.org or by phone: 0131 516 5365 / 07841 920 101. You can also view Andrew’s profile by clicking here.
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