UK insurers will have to pay out on thousands of business interruption policies because of Covid-19 after losing an appeal to the Supreme Court.
Following today’s decision, the insurance industry is expected to pay out over £1.8bn in coronavirus claims related to the first lockdown, which includes business interruption policies.
The Financial Conduct Authority (FCA) and six companies brought the test case after insurers refused to pay out to small and medium-sized enterprises for the costs of business disruption caused by Covid-19. The Supreme Court ruling ends the legal proceedings and opens the way for policyholders to receive the money they were due.
Huw Evans, director general of the Association of British Insurers (ABI) confirmed insurers would settle claims as soon as possible.
“Customers who have made claims that are affected by the test case will be contacted by their insurer to discuss what the judgment means for their claim. All valid claims will be settled as soon as possible and in many cases the process of settling claims has begun,” he said after the judgment.
Hundreds of thousands of businesses that were forced to close or faced significant losses made claims on their business interruption insurance. But leading insurers disputed the claims arguing their policies did not cover the restrictions.
This prompted the FCA to bring a test case on behalf of policy-holders seeking legal clarity on the issue.
The Financial Ombudsman Service and courts in Scotland and Northern Ireland are expected to base their decisions on the Supreme Court’s ruling.