Legal update: Covid-19 business interruption test case – Supreme Court judgment

The Supreme Court has today (15 January 2021) handed down its judgment in the test case brought by the Financial Conduct Authority (FCA) on behalf of policyholders making business interruption claims related to Covid-19

As explained in our original update, the Covid-19 pandemic has impacted businesses of different sizes in different ways.  Small and medium-sized enterprises (SMEs) have been particularly hard hit due to holding more limited cash reserves.  Many paid for business interruption insurance which they believed would support them in these circumstances.  However, a number of insurers disputed that their policy wordings should respond to the unprecedented losses suffered by businesses as a consequence of the pandemic.  This has left some businesses with cover and others in dispute with their insurer at a time when cash-flow is tight.

The Supreme Court’s decision (FCA v Arch & Others [2021] UKSC 1) will come as welcome news for these policyholders, of whom there are estimated to be as many as 370,000.  The FCA’s appeals have been substantially allowed.  This should mean that insurers move quickly to pay out on claims where the Supreme Court has found that the relevant wording should respond to a claim.  The FCA has made clear that they expect insurers to make interim payments wherever possible.  Payments from these policies may provide a vital lifeline to SMEs.

The Court will shortly issue a series of declarations regarding the policy wordings, after which further guidance can be anticipated from the FCA.  That should not prevent policyholders from engaging with their insurer now and seeking prompt payment.

If you would like to discuss your case, please contact a member of Tyr Law’s Litigation Team.

Author: Nigel Brook