A High Court ruling on business insurance claims over coronavirus disruption will be “welcome news” for many firms, according to a UK watchdog.
Around 370,000 firms could be affected by the judgement, which is part of a test case looking at key issues around firms’ entitlements to payouts over the impact of the government-imposed lockdown.
The Financial Conduct Authority (FCA), Britain’s financial watchdog, brought a case on behalf of firms to resolve disputes over insurance terms, which have seen many unable to make successful claims so far.
A 162-page judgement was published on Tuesday in the case, setting out the court’s position on the meaning of the wording in many, though not all, common business interruption policies. The complexity of the case also prompted the FCA to publish a summary by its lawyers, Herbert Smith Freehills.
“We are pleased that the court has substantially found in favour of the arguments we presented on the majority of the key issues,” said Christopher Woolard, interim chief executive of the FCA.
“Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat.
“Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful.”
The FCA had argued policies which covered firms for business interruption from infectious or so-called ‘notifiable’ diseases should have cover for COVID-19 disruption. It argued firms with clauses on “denial of access” or “public authority closures or restrictions” should likewise receive payouts.
Some insurers have paid out on such clauses, according to the FCA, but some have denied liability, prompting the FCA to bring the case to achieve clarity.
It said the judgement had found “most, but not all” of the policies with disease clauses provide cover, while “certain” policies on limited access and authority restrictions similarly provide cover.
The FCA noted the judgement did not show eight defendant insurers were liable across all 21 types of policy wording it had brought before the court. It also does not determine how much is payable under individual policies.
“Each policy needs to be considered against the detailed judgment to work out what it means for that policy. Policyholders with affected claims can expect to hear from their insurer within the next 7 days,” it said.