Legal Victory for Business Interruption insurance policy holders

In an important test case brought on behalf of policyholders by the Financial Conduct Authority the High Court held on 15 September 2020, that the majority of businesses who were forced to close as a result of the COVID-19 pandemic and who hold business interruption (BI) insurance policies are entitled to compensation from their insurers.

Businesses may now be entitled to a pay-out which would effectively put them back in the position had the pandemic never occurred. This will however always be subject to any relevant limitations under the relevant policies.

The case was brought against eight insurers including Hiscox, RSA, QBE and Zurich over whether various business interruption policy wordings should cover for closures and disruption put in place due to the pandemic. The case is estimated to affect as many as 370,000 policyholders.

The FCA acknowledges that the judgment did not say that insurers are liable across all of the 21 different types of policy wording considered by the court in the test sample. “Each policy needs to be considered against the detailed judgment to work out what it means for that policy,” said the FCA. They have however written to insurers instructing them to not only reassess and settle claims quickly, but also make interim payments wherever possible. The regulator said it wants to ensure that slow payment does not “exacerbate financial pressures” on policyholders.

Photo by Mahosadha Ong on Unsplash