Business interruption insurance & Covid-19 – can your business benefit?
Covid-19 has resulted in untold financial hardship for businesses and the hospitality sector across Northern Ireland. However, a recent judgment handed down by the Supreme Court which allowed the appeal brought by the Financial Conduct Authority on behalf of policyholders of business interruption insurance, bodes well for the many shops, pubs, restaurants and other business owners who have been affected.
Christopher Bullock, an associate solicitor in the Commercial Department at O’Reilly Stewart Solicitors specialising in advising the hospitality and licensing sector, offers advice to the sector:
“When businesses had to close upon the first lockdown last Spring, many who had business interruption cover in their insurance policies, attempted to claim off those policies.
“This type of insurance is commonly used where a business suffers a loss due to the interruption caused by a fire, flood, or other similar natural disaster including infectious or notifiable diseases. However major insurers resisted such claims, citing that the unprecedented lockdown situation and subsequent loss of earnings was not covered by their respective policies.
“The Financial Conduct Authority, a UK consumer protection body and regulator of insurance companies, took a claim on behalf of policy holders against insurers, with eight majors insurers agreeing to take part in the test case. Twenty-one sample policy wordings were considered but the FCA estimates about 700 types of policies held by over 370 policy holders and 60 different insurers could be affected.
“In the test case of The Financial Conduct Authority v Arch and Others, the Supreme Court allowed the appeal brought by the FCA on behalf of policyholders of business interruption insurance. The FCA sought clarity on the extent of the coverage provided by business interruption insurance, namely whether a policyholder could rely on this kind of policy for losses caused by the Covid-19 pandemic.
“The Supreme Court ruling involved the consideration of complex legal matters but in summary now means that small and medium sized enterprises may be eligible to receive payments if they hold a relevant business interruption insurance policy. This ruling will now make it difficult for insurers to deny cover or reduce an indemnity on the basis that the loss would have resulted in any event from ‘non-damage perils’ caused by the Covid-19 pandemic.
“While the case was brought before the English courts, ultimately ending up in the Supreme Court, we can expect to see the Financial Ombudsman service and the NI courts follow the guidance provided by this ruling in future cases. Insurers should now contact relevant policyholders to make payments, but it is recommended to all business owners to consult your own policy if you feel you may have relevant cover for business interruption.”