In the first lockdown, many businesses attempted to make claims against their business interruption policies for loss of earnings on account of having to close, however, insurers refused to pay out. On account of this a test case was put through the courts by the FCA on behalf of policy holders, in which a selection of some 21 insurance policy wordings were considered, which in turn would affect some 700 policy types and 370,000 policy holders. This culminated in the handing down of a Supreme Court judgment last Friday, which was a complex ruling examining issues such as disease clauses, prevention of access to properties and the timing of the lost earnings. The Supreme Court found largely in favour of the FCA- a victory for the insured.
As a result, insurance companies will now have to pay out to policy holders in the vast majority of cases and it is anticipated that this could cost the insurance industry up to £1.2 billion. For policy holders therefore, in the first instance one should contact your insurance company urgently. They will notify the insurers to make a claim. The insured will need to provide relevant information to support their claim. This will include details of when they had to close their premises/stop trading and for what reason and also accounting information showing what their losses are- both in terms of lost revenue and additional business expenses caused by Covid. The insurer will then consider the claim and in the event of it being rejected there might be cause to refer the matter to the Financial Ombudsman Service.
It should be noted that since this issue emerged in the first lockdown, many insurance policies were amended for new and renewing customers, so losses from the more recent lockdowns will be expressly addressed as either being part of the cover or not in new business interruption policies.