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UK Supreme Court rules that insurers must pay out on a large number of disputed pandemic-related business interruption claims

On Friday 15th January the UK Supreme Court made the final ruling on a long running legal process concerning whether insurers needed to pay out on tens of thousands of business interruption claims from organizations impacted by pandemic-related losses.

Led by the UK Financial Conduct Authority, the legal process is now completed and 'thousands of policyholders will have their claims for coronavirus-related business interruption losses paid' says the regulator.

For more details about the legal process and the outcome click here.

Industry comments

Association of British Insurers (ABI)

Huw Evans, ABI Director General, said:

“Insurers have supported this fast-track legal process every step of the way and we welcome the clarity that the judgment will bring to a number of complex issues. Today’s judgment represents the final step in the appeal process.

“The insurance industry expects to pay out over £1.8bn in COVID-19 related claims across a range of products, including business interruption policies. Customers who have made claims that are affected by the test case will be contacted by their insurer to discuss what the judgment means for their claim. All valid claims will be settled as soon as possible and in many cases the process of settling claims has begun. Some payments have already been made where valid business interruption claims have not been impacted by the test case ruling.

“We recognise this has been a particularly difficult time for many small businesses and naturally regret the COVID-19 restrictions have led to disputes with some customers. We will continue to work together as an industry to ensure customers have the clarity they need when it comes to what they can expect from their business insurance policies.”

Federation of Small Businesses (FSB)

FSB National Chair Mike Cherry said:

“Today’s judgement is a big victory. It cements the high court’s decision to grant businesses left on the brink the insurance pay-outs they are rightfully owed. For many, it has been a long and difficult road to get to this stage so this will bring clarity and hope to the thousands of firms which have been left in financial limbo for almost a year.

“While this is good news, and while the law has to follow procedure, it’s disappointing that so many small businesses have had to wait to get the money they desperately need under policies they believed were there to protect them, policies they bought in good faith.

“Businesses deserve to be protected in a timely way, but instead they have been failed by their insurers and are now trying to make up for lost time. Providers must now pay-out quickly, and consider the steps they can take to progress these claims in a swift and seamless manner. Any paperwork required of claimants shouldn’t be onerous or time-consuming. 

“Small businesses contribute trillions to the economy. The Financial Conduct Authority (FCA) was right to argue that disease or denial of access clauses within interruption policies should trigger pay-outs in the event of coronavirus-linked disruption. We are hugely grateful for its work in this space.”


John Ludlow, CEO of Airmic, commented:

“The Supreme Court’s landmark ruling today on the FCA's business interruption (BI) insurance case for COVID-19 claims is one of the most important legal issues of the last decade. Affected policyholders will welcome the ruling to unanimously dismiss insurers’ appeals and to substantially allow all four of the FCA’s appeals in favour of policyholders.”

Julia Graham, Airmic’s deputy CEO and technical director, commented:

“This morning’s decision by the Supreme Court represents positive news for hundreds of thousands of commercial insurance buyers across the UK. The Supreme Court’s ruling completes the legal process for impacted policies and means that many more claims can now be processed and paid out to businesses that are already feeling the strain during the pandemic period.

“To provide some scale to the significance of this morning’s Supreme Court ruling, the FCA has estimated that some 370,000 policyholders would be affected by today’s Supreme Court decision, paving the way for up to £1.2bn in BI claims payments, across 700 policy types, from 60 insurers.”

Mr Ludlow added:

“Insurance buyers have faced a harsh insurance market in 2020-2021. The rocky business conditions felt by many during the pandemic and the resultant economic downturn have been met with hard insurance market pricing during recent renewals discussions.

“Many of the insurance buyers affected by the FCA’s BI case are long-term insurance partners; now that many more of these BI claims are to be paid, it will be to the benefit of enduring relationships between carriers and their policyholders, which in many cases were already strained not just by this case but by recent market conditions. Today’s news should be viewed within that broader context.”

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