Originally written by Timothy Adler on Small Business
Small businesses that bought policies from insurers specifically against disease celebrated today now that the High Court has sided with them.
The Financial Conduct Authority took a test case to the High Court, legally testing business interruption policies from eight insurers to see if they had to pay out.
But the High Court has ruled that insurers are liable to pay out in the majority of 21 different types of policy wording judges considered.
Fran Tremeer, a solicitor at Royds Withy King, predicted that any comfort for some businesses would be “short-lived” and that, despite being in a precarious situation since March, businesses will continue to be frustrated over uncertainty.
Indeed, insurers will continue to fight this all the way to the Supreme Court, predict lawyers. However, the result of any High Court appeal would not likely be handed down until 2021.
Stephen Netherway, head of insurance at law firm Devonshires said: “Today’s judgment gives a much-needed lifeline to struggling businesses across the UK and could prevent many from going bankrupt. It provides for many a basis for presenting their Covid business losses under their commercial insurances.
“As a result, today’s victory for the FCA, provided payments are to be made now, will save thousands of people from losing their jobs. Fundamentally it will mean ma”ny millions of pounds being paid out to some of the businesses that are desperate for a cash injection.
The FCA says around 370,000 business policyholders will be affected by today’s outcome. Affected policyholders should receive an update from their insurers within the next week.
Julie Hunter, senior associate counsel at Stephensons Solicitors, said that businesses “will now feel there is finally some light at the end of the tunnel” having been left in limbo for the past six months.