Updated: 25 January 2021
During the first national lockdown in March 2020, many small businesses were forced to close. Those that had taken out business interruption insurance tried to make a claim, but found it difficult to get a payout. However, a recent Supreme Court ruling could be set to change all of that. Here, we go into the details of the ruling, what it means for you, and how you can make a claim.
Business interruption is typically provided as part of a business insurance policy, but can be bought as a separate policy in its own right. It focuses on unexpected disruption caused by unforeseen circumstances, such as fire or flood. Having this type of cover in place ensures that, in the event you’re not able to trade for a sustained period of time due to such an event, you should be covered by your insurance.
These policies will cover financial losses that are a direct consequence of the business interruption that has occurred, such as loss of revenue, loss of rental income or additional staff costs.
The case focused on whether disruption due to the national lockdown in March 2020 could be claimed under business interruption policies. Many small businesses tried to make claims against their insurance for their loss of earnings, however insurers often refused to pay. The argument was that only the most specialist policies had cover for unprecedented circumstances such as these.
A selection of policy wordings were then decided to be tested in court, in order to set the parameters of what could be considered for a valid claim. It was brought to trial by the Financial Conduct Authority (FCA) and eight insurers agreed to take part in the proceedings.
The case was fast-tracked to the highest court in England and Wales, which heard four days of legal representations in November 2020.
In the test case, the Supreme Court ruled in favour of small business owners, and the ruling will provide guidance for 700 of these policies, and potentially similar ones that weren’t included in the case.
The ruling itself covered issues such as disease clauses, whether businesses were denied access to properties, and the timing of their lost earnings. The court accepted the arguments that were presented by representatives of policyholders, and they dismissed appeals from insurers against an earlier judgement finding in the policyholders’ favour.
Simply put, if your business experienced disruption due to the lockdown in spring 2020, and you had a business interruption insurance policy in place, you might be able to make a claim for the losses you sustained during that time period.
Up to 370,000 small businesses could stand to benefit from the Supreme Court ruling, however it’s important to remember that only a selection of these will actually end up with payouts from their insurance company.
If you’ve taken out an insurance policy since the start of the pandemic, or have renewed your existing one, your insurance policy wording will have been amended to reflect the current climate. This means that your insurance policy should now clearly state whether losses from more recent lockdown measures are included or not.
To make a claim for any coronavirus disruption that your business suffered during the first national lockdown, you’ll need to get in contact with your insurance company directly to submit a claim. Remember, the Supreme Court decision only affects those who had a business interruption insurance policy during that time. If you didn’t already have this cover in place, you’ll be unable to make a claim for any subsequent lockdown losses, unless these are explicitly stated as included in your insurance policy.
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