UK: Supreme Court orders insurers to pay out for coronavirus-related business interruption losses

UK: Supreme Court orders insurers to pay out for coronavirus-related business interruption losses

Thousands of UK businesses will receive payouts for coronavirus-related business interruption losses after the UK Supreme Court sided with the Financial Conduct Authority (FCA) in a landmark test case.

The complex 112-page judgment augurs poorly for Irish insurers in a similar test case in the Irish High Court which has been adjourned until the first week in February to allow parties to consider the UK ruling.

As many as 370,000 UK policyholders, holding 700 types of policies issued by 60 insurers, may be affected by the outcome of the test case.

Herbert Smith Freehills, acting for the FCA, said the ruling brings “definitive guidance on the proper operation of cover under certain non-damage business interruption insurance extensions and clarity to policyholders and insurers alike”.

The FCA had already been successful on many of the issues at first instance, but the Supreme Court, which heard the case as a ‘leapfrog’ appeal, has now gone further in dismissing insurers’ appeals and allowing all four of the FCA’s appeals (in two cases on a qualified basis).

Paul Lewis, partner and global head of insurance disputes, said: “This is a very positive result for policyholders. It improves their position significantly beyond that which was already established by the High Court judgment.

“Importantly also for the insurance industry the judgment brings definitive guidance to how business interruption insurance wordings should operate in the context of the Covid-19 pandemic, which has had such a devastating effect on businesses across the country.

“The speed with which these proceedings were brought, and the breadth of the issues covered, is a great credit to the efforts of the FCA, Counsel and Herbert Smith Freehills team.”

Share icon
Share this article: