Business closing regarding the business interruption insurance test case going to Supreme Court

The Financial Conduct Authority’s (FCA) COVID-19 business interruption insurance test case is headed for the Supreme Court.

The Supreme Court will begin hearing the case Monday, according to a BBC report. The hearing is expected to last four days, at which point the judges will make their final judgment.

History of the Case

Many businesses throughout England and Wales were hit with losses or were forced closed entirely due to restrictions put in place in an effort to curb the spread of the coronavirus pandemic, and as a result filed claims on their business interruption insurance.

However, insurers disputed many of the claims, saying the policies weren’t intended to cover restrictions such as those in effect during the pandemic.

And so, the FCA filed the business interruption insurance test case in June. Eight insurers took part in the proceedings.

The Association of British Insurers (ABI) told the BBC in July that most business interruption insurance policies don’t cover pandemics because the amount of risk involved would make the premiums too expensive. 

“This is not a debate about whether these policies were intended to cover pandemics, it is a debate as to whether the wordings of these policies inadvertently cover pandemics,” ABI director general Huw Evans told the BBC: “It is an argument about whether the wording allows insurers to decline the claim.”

The case eventually went to the High Court, where judges ruled in favor of the policyholders. According to the BBC, the High Court found most policies should pay out to small businesses.

We are pleased that the court has substantially found in favour of the arguments we presented on the majority of the key issues,” FCA interim chief executive Christopher Woolard told the BBC in September. “Today’s judgement is a significant step in resolving the uncertainty being faced by policyholders.”

In late September, the FCA filed an expedited appeal, fast-tracking the case to the Supreme Court.  

The Supreme Court’s final decision is expected within weeks after the hearing ends, according to the BBC. The FCA expects insurers will respond quickly if they are required to.

The final ruling in the business interruption insurance test case will affect about 370,000, mostly small, businesses, according to the BBC. The potential payout could be £1.2 billion.

What Will the Supreme Court Consider?

Business closing regarding the business interruption insurance test case going to Supreme CourtAccording to the BBC, the Supreme Court will review and discuss the ruling of the High Court.

The High Court examined 21 types of policies as it heard the business interruption insurance test case, the BBC reported. Appeals were made in 13 of those rulings.

The lower court determined 11 of the policy types should have resulted in payouts for business owners, while two should not; those two cases are the subject of the FCA’s appeal in the test case.

The decisions on the other 11 are being appealed by insurers, according to the BBC.

Judges found entirely in favour of insurers Zurich and Ecclesiastical. Those cases are not being appealed.

The Supreme Court’s ruling is expected to provide guidance for the remaining policies, as well as similar policies that were not considered as part of the business interruption insurance test case, the BBC reported. The Financial Ombudsman Service and the courts in Scotland and Northern Ireland are expected to use the Supreme Court’s decision when making rulings on similar cases.

Worldwide Business Interruption Insurance Lawsuits

Businesses in other countries have been struggling with business interruption insurance coverage amid the pandemic, as well.

In the United States, many business owners who had business interruption insurance policies assumed they’d be able to make claims when coronavirus pandemic lockdowns began in mid-March. 

However, businesses continue to have their claims denied.

Insurers claim the policies cover only physical loss or damage that force a business to close – damage caused by a hurricane or tornado, for example.

But many of these businesses are pushing back, saying damages caused by the pandemic must be covered because the businesses carried “all-risk” insurance policies.

In British Columbia, Canada, businesses are fighting a similar fight.

Between March and April, nearly 16,000 businesses closed in Greater Vancouver, Statistics Canada reported.

Many of those businesses and others throughout Canada had business interruption insurance they thought would help them weather the pandemic. But they have ended up fighting for compensation from their insurance companies with class action lawsuits instead.

Several major Canadian insurers apparently have denied legitimate claims, according to a Top Class Actions investigation.

Much like the U.S. insurers, Canadian insurers also argue that the pandemic has not caused physical loss or damage that forced business owners’ properties to close. They claim COVID-19 is a “force majeure” event.

Class action lawsuits have been filed in both the U.S. and Canada in an effort to force insurance companies to pay out on business interruption insurance claims.

Are you a small-business owner? Have you filed a business interruption insurance claim during the pandemic? Tell us about your experience in the comment section below.

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