Closed Restaurant due to Covid-19

Court rules Business Interruption Insurance may provide disease cover


A recent high court ruling may have thrown a lifeline to as many as 370,000 businesses that hold Business Interruption Insurance policies, and the news has been welcomed by the Financial Conduct Authority (FCA).

Many business owners, who were forced to close their doors during the government enforced lockdown, had seen their initial claims under their Business Interruption policies declined by insurers who disputed liability, but this ruling may now help to trigger payouts from these policies.

Initially many insurers had declined claims, disputing the policies in question and whether or not the “notifiable diseases” clause would be applicable. However,  the FCA brought a case to court and presented a sample of 21 policy wordings used by 16 different insurers as a representative sample for the court to consider and the judgement found that most, but not all, of the disease clauses in the sample do provide cover. In particular, the court ruled that the payouts should put businesses back in the position they would have been in had the Covid-19 virus, and resulting lockdown, never existed.

Whilst the ruling can be seen as great news for many businesses across the UK, this could also of course be subject to an appeal from the insurance companies. Commenting on the judgement, FCA interim chief executive Christopher Woolard said that “Insurers should reflect on the clarity provided here [within the judgement] and irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgement says should be paid.”

For local businesses in the hardest hit sectors such as Hospitality, Leisure and Tourism this ruling could provide a much needed injection of cash at a time when localised lockdowns are now being introduced in many parts of the country.  

Unless successfully appealed, the High Court judgement will be legally binding on the eight insurance companies who were part of the case.  Hopefully, any appeals will be heard quickly and hard working business owners from up and down the UK can receive some good news towards the end of 2020, a year we’ll all remember for the wrong reasons!

Acting for over 400 businesses operating within the Hospitality, Leisure & Tourism sector, we believe we can add real value to your business. With offices based in some of the country's top destinations for tourism and with local knowledge of these areas means that as our client, you will benefit from working with an adviser who understands the regional issues that may affect your business.