Small businesses in Britain may be entitled to about £1.2 billion in compensation from insurers for COVID losses, according to a recent ruling by the country’s Supreme Court.
The U.K.’s financial protection agency, the Financial Conduct Authority, reportedly advocated for businesses to shut down during the coronavirus pandemic, arguing that insurers should cover losses faced during the initial lockdown. According to Courthouse News, the government agrees with the recent ruling with officials noting that the $1.6 billion payout may help thousands of small businesses stay afloat.
“A very welcome decision by the Supreme Court,” Business Secretary Kwasi Kwarteng reportedly stated on Twitter after the ruling was announced.
“This will be a lifeline for tens of thousands of hairdressers, bars, restaurants and other small businesses that did the right thing and closed their doors to protect the health of the nation.”
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Businesses Fight for Insurance Coverage for COVID Losses
Reportedly, the lawsuit took aim at the country’s biggest insurance companies, Hiscox, RSA, QBE, Argenta, Arch and MS Amlin. The plaintiffs, small businesses who were also business interruption insurance policyholders, said that their claims had been wrongly denied.
The insurance companies argued that losses suffered by businesses forced to close amid the first wave of the coronavirus fell under exceptions to their business interruption policies. According to Reuters, the Financial Conduct Authority joined the plaintiffs and appealed the case all the way to the U.K. Supreme Court as a test case for future lawsuits.
“The test case was not intended to encompass all possible disputes, but to resolve some key contractual uncertainties and ‘causation’ issues to provide clarity for policyholders and insurers,” stated the FCA, according to Insurance Business UK.
After reviewing the terms of the interruption insurance policies at issue, the Supreme Court sided with the plaintiffs and the FCA.
“This is a landmark victory for a small group of businesses who took on a huge insurance player and have been fully vindicated,” a lawyer representing the business owners in the lawsuit reportedly stated after the ruling was announced.
“What is important now is that Hiscox accepts the Supreme Court’s verdict and starts paying out to its policyholders, many of whom are in danger of going under.”
Thousands of Business Owners May Be Compensated
According to the FCA, the £1.2 billion won will be distributed amongst nearly 400,000 policyholders claiming COVID losses. In addition, the ruling could affect at least 60 insurance companies. The lawsuit may have more far-reaching impacts in the U.K. and, perhaps, in other countries where business owners say their interruption claims were wrongly denied.
Indeed, business owners reported that the compensation may help them survive a third COVID-19 lockdown. However, some business owners say that the win comes too late.
A café owner told Reuters that, though “the war is not over,” he feels the decision comes “10 months too late.”
“Getting payment, compensation and costs … is another whole new fight which begins today,” he concluded.
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