Following the Supreme Court ruling on Business Interruption insurance, solicitor Jody Thomasson from Chamber member Harrison Drury looks at what the judgment means for businesses.
Businesses across the country have been grappling with unprecedented circumstances and uncertainty because of the coronavirus pandemic (COVID-19).
Unfortunately, and inevitably, many of the restrictions imposed have interrupted business operations and caused losses as a result.
On 15 January 2021, the Supreme Court handed down its 114-page judgment in relation to the nature and extent of cover afforded to businesses under Business Interruption insurance clauses.
While the Supreme Court (and this test case generally) could only reasonably consider a relatively small number of insurance policy wordings, it is anticipated that similar standard wordings exist across a wider pool of some 700 types of policies with the potential for this judgment to affect around 370,000 small businesses.
How does this judgment impact the ability of my business to recover losses from insurance?
The decision in this test case is of key importance, particularly as prior to today thousands of businesses found that their claims were being declined by insurers on the basis that the policies did not cover all or some of the effects of the pandemic. For those whose claims were not declined, they will have been eagerly awaiting this decision to enable their claims to press ahead.
The Supreme Court has determined the proper interpretation of four types of clauses commonly found in business interruption policies. These are:
1. ‘Disease clauses’ – clauses which generally provide cover for business interruption losses resulting from the occurrence of a notifiable disease, or at a specified distance of the business premises;
2. ‘Prevention of access clauses’ – clauses which generally provide cover resulting from public authority intervention preventing or hindering access to or use of the business premises;
3. ‘Hybrid clauses’ – clauses which combine disease and prevention of access clauses; and
4. ‘Trends clauses’ – clauses which generally provide for business interruption loss to be quantified by reference to what the performance of the business would have been had the insured peril not occurred.
The Supreme Court’s judgment on how widely these clauses ought to be interpreted in relation to COVID-19 is favourable to policyholders, meaning that it is not now the case that claims will only be paid in a very narrow set of circumstances. If you recognise some of these terms from your own policy, or your insurer has declined your claim and you wish to challenge this, please get in touch.
I’ve already had my claim for business interruption declined, what can I do?
An insurance policy is a contract and the terms of each policy, as usually set out in the policy wording, differ between insurers and policies. Interpreting policy wordings can be a difficult task and this is critical as it will directly inform whether a claim is covered or not. The application of the Supreme Court judgment must now also be considered in each case.
It is important to consider the individual basis on which your claim has been declined and whether, in light of today’s judgment from the Supreme Court, there are grounds to compel insurers to revisit their decision.
Ultimately each claim warrants careful analysis on its own facts.
We know that many of our business clients are facing these issues and so we are pleased to offer our expertise to help. Bearing in mind the financial impact of COVID-19, we have developed a fixed-fee policy review product whereby we are able to advise businesses of their prospects of recovery under these policies.