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Insurers must pay small businesses for Covid losses

A recent win in the Supreme Court means some insurers must pay out on business interruption claims for small firms, explains Mike Wakeling, partner in Lodders’ Commercial Dispute Resolution team.

A fortnight ago (15th January 2021), the Supreme Court found largely in favour of small businesses receiving payments from insurance companies on business interruption policies. The ruling will provide a lifeline to thousands of businesses as well as those whose jobs rested on the outcome of the case.

What was the case about?

During the lockdown in March last year, many small businesses and firms claimed against business interruption insurance policies for money they had lost when they were forced to close due to Covid-19 restrictions introduced by the government.

The case arose when many insurers refused to pay, citing that the policies did not cover the unprecedented situation.

The purpose of the case was to clarify contractual uncertainty for both policyholders and insurers, testing a selection of sets of policy wording in court in order to decipher what would and would not be considered a valid claim against a policy.

The case was brought by the Financial Conduct Authority (FCA), with eight insurers taking part in the proceedings. It provides guidance for around 700 policies, and will potentially impact upwards of 370,000 small businesses.

 Claims for Covid losses to be paid

The decision by the Supreme Court removes the need for policyholders to resolve key issues individually with their insurers. Now, thousands of policyholders will have their claims for Covid-19 related business interruption losses paid.

Valid claims will begin settling soon, with some instances where the claims process has already begun.

Victory for small businesses

 The landmark victory for small businesses is a positive result for thousands of small businesses facing substantial losses as a result of Covid-19, who were otherwise facing the prospect of going out of business.

Businesses and policyholders impacted by the decision can expect to hear from their insurance company within seven days.

More information

 Lodders’ specialist Dispute Resolution team have expertise in both business-related and personal disputes. We can help if you are looking to pursue a claim.

For more information, please get in touch on 01789 293 259, or via email.

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Get in touch...

 Lodders’ specialist Dispute Resolution team can help if you are looking to pursue a claim, for more information, please get in touch on 01789 293 259, or via email.