Will small firms be able to claim on business interruption insurance for coronavirus lockdown?

The Supreme Court is set to decide whether hundreds of thousands of businesses should be in line for payouts

Many businesses, including pubs, have not been able to claim for losses caused by the pandemic (PA)

Hundreds of thousands of small businesses are hoping that the Supreme Court will hand them a lifeline and rule that insurers should pay out on claims relating to trade lost during coronavirus lockdowns.  

On Monday, justices in England and Wales’s highest court began hearing a case brought by the City watchdog over blanket rejections of claims on business interruption insurance policies.

Hairdressers, bars, restaurants and other firms ordered to shut their doors believe their insurance - designed specifically for unexpected closures - should pay out. Insurers disagree.

So what is being argued and how might the result impact British businesses?

Many companies have business interruption insurance to support them through times when they can't trade for a number of reasons, including an enforced shutdown by authorities due to a disease.

Thousands of policyholders have found their claims have been rejected since the pandemic began. Some have gone out of business as a result.  

Insurers argue that business interruption policies were not meant to cover businesses for lockdown losses.

The Financial Conduct Authority (FCA) brought a test case to obtain a judicial ruling on whether policy wordings commonly used by eight insurers mean that they should not reject claims relating to lost trade during the coronavirus lockdowns.

On 15 September the High Court ruled in favour of businesses and but six of the eight insurers involved launched an appeal. Judges looked at 21 policy types. Decisions on 13 of those have been appealed. The court said 11 of these should pay out. The FCA has appealed against the judgment on the other two.

The case has been fast-tracked to the Supreme Court in the hope that a judgment can provide certainty for businesses fighting for survival.

Which insurers does this cover?

The Supreme Court case covers Arch Insurance; Argenta; Hiscox; MS Amlin; QBE and RSA. The High Court found in favour of two other insurers, Zurich and Ecclesiastical Insurance, who were originally named in the case so they are not covered by the appeal.  

The Supreme Court will provide guidance on each of the policy types, hopefully providing sufficient clarity for both insurers and policy holders.

What is at stake and when will there be an outcome?

An estimated £1.2bn of payouts for as many as 370,000 businesses.  

It is not known how long the judges will take to reach a conclusion but legal experts expect a ruling to be handed down within weeks.