Bishop & Sewell

A fast-tracked test case, heard by the Supreme Court of England and Wales, will have brought relief to thousands of businesses that prudently took out business interruption insurance only to find insurers refused to pay out due to COVID-19 writes Michael Kashis, Managing Partner and Head of our Corporate & Commercial team.

The Supreme Court gave its ruling last week having heard four days of representations by the Financial Conduct Authority (FCA) which brought the case on behalf of policyholders and eight insurance companies who agreed to take part on behalf of their industry.

Reported here by the BBC, Sheldon Mills, from the FCA, said: “Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. [This] judgment decisively removes many of the roadblocks to claims by policyholders.

“We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible.”

Also quoted by the BBC, Richard Leedham, who represented the Hiscox Action Group – on behalf of small businesses, said: “This is a landmark victory for a small group of businesses who took on a huge insurance player and have been fully vindicated.

“What is important now is that Hiscox accepts the Supreme Court’s verdict and starts paying out to its policy holders, many of whom are in danger of going under.”

It was agreed that a selection of policy wordings should be tested in court, setting the parameters for what would be considered a valid claim. The ruling provides guidance for a wider pool of 700 policies, potentially affecting 370,000 small businesses according to the BBC.

The judgement given what will now also need to happen of course is for policyholders to check very carefully when renewing any such policy to be quite sure what is, and is not, subsequently included in any newly drawn policies.

As you might imagine the Association of British Insurers issued their own statement here, taking the judgement on the chin: “Insurers have supported this fast-track legal process every step of the way and we welcome the clarity that the judgment will bring to a number of complex issues. Today’s judgment represents the final step in the appeal process.

“The insurance industry expects to pay out over £1.8bn in Covid-19 related claims across a range of products, including business interruption policies. Customers who have made claims that are affected by the test case will be contacted by their insurer to discuss what the judgment means for their claim. All valid claims will be settled as soon as possible and in many cases the process of settling claims has begun. Some payments have already been made where valid business interruption claims have not been impacted by the test case ruling.”

It is hard to imagine the ABI ‘welcomed the clarity’ through anything other than gritted teeth having appealed their case all the way to the Supreme Court.

If you need advice or help regarding Corporate & Commercial matters, please contact Michael Kashis or another member of our expert Corporate & Commercial Team on 020 7631 4141 or you can email

The above is accurate as at 18 January 2021. The information above may be subject to change during these ever-changing times.

The content of this note should not be considered legal advice and each matter should be considered on a case by case basis.

Category: News | Date: 18th Jan 2021

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