Old Mill Updates

COVID-19: Supreme court rules in favour of small businesses in landmark business interruption insurance case

Tens of thousands of SMEs that have been forced to close during lockdown may potentially be able to claim on their business interruption insurance following a test case ruling in their favour.

15th January 2021

The supreme court has thrown out appeals by six insurers following arguments made by the Financial Conduct Authority and a policyholder action group who claimed that they should have received pay-outs from insurers after government-imposed lockdowns left them unable to trade.

Typically, business interruption insurance is meant to pay out if a firm cannot trade as usual owing to an unexpected event, but many business owners found their insurers reluctant to pay out arguing that these policies were not designed to cover a government-imposed lockdown.

Click here for more detail on the Financial Conduct Authority website.

Click here for a summary of the judgement from the FCA’s solicitors.

A cautionary note

Chris Bowles, director at Old Mill’s Wells office commented ‘This decision is potentially a lifeline for many small businesses across the region that have suffered losses caused by lockdown, but I would advise people not to bank on a pay-out just yet. 

‘Today’s judgement is only binding on the six insurers involved in the test case and provides ‘guidance’ for the rest. As with most insurance, this is a complex area, and the outcome is not cut and dried unless your insurer writes to you to say that they feel the position has changed following the judgement. 

‘So, if you have had a claim rejected, we would urge you to speak with your insurance adviser in the first instance and (if it’s appropriate) get them to go back and ask the insurance company to revisit their original decision in light of the supreme court’s decision.’

For further information please contact your usual Old Mill adviser or click here