Following a landmark decision by the Supreme Court, many businesses in England and Wales could be due an insurance pay-out for loss of income and disruption as a result of the first COVID-19 lockdown.
Here, our Partner, Luke Morgan, who specialises in Commercial Litigation and Dispute Resolution explains the ruling and how it could affect business claims:
This ruling substantially allowed the appeal brought by the Financial Conduct Authority (FCA) and campaign groups Hiscox Action Group and Hospitality Insurance Group Action following an earlier case at the High Court.
During this case, the court found that the wording of many Business Interruption insurance policies meant that thousands of UK businesses should have received a pay-out for disruption and loss of earnings caused by the pandemic, despite many initially being told that they could not make a claim.
As businesses begin to assess the level of payment due to them, it is important that they understand what can and cannot be claimed, so that they can calculate the loss of profits during the period they were affected.
The Supreme Court judgment confirmed that losses should be calculated by extrapolating the financial performance of the business based on how it was trading before it was forced to close.
This may make it hard for those businesses that were adversely affected, but remained open, to make claims, compared with those that were forced to shut completely as a result of Government restrictions.
Many of the insurance policies affected by the ruling include so-called “Trends Clauses”. These state that if a business was already in decline before Covid-19, that decline will be assumed to have continued for the purposes of working out how it would have performed had it not been forced to close.
Where a business had been growing prior to the lockdown, that trend too should be assumed to continue under the same mechanism within a policy.
Claiming for losses incurred during the period before a business was forced to close or the period after it reopened, as trade gradually resumed, is likely to be more difficult than claiming for losses during the period of closure.
Another important factor in claims, which is likely to affect a company’s ability to claim or its calculation of loss, could be whether access to the insured premises was prevented or merely hindered.
In conclusion, although the Supreme Court ruling is welcome news for many businesses, making a successful claim is not straightforward.
If you have already submitted a claim which was previously rejected by your insurance company, you should seek legal advice.
Our dispute resolution team can act on your behalf to ensure your business recovers the funds you are owed.
If you have yet to make a claim or are unsure whether you are eligible, we can review your policy contract and advise you on your prospects of recovering business interruption losses as a result of the court ruling.
If you require any advice or support with making or disputing a business interruption insurance claim, please contact us.