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Supreme Court set to decide in Covid-19 Insurance Dispute

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The Supreme Court in London is about make its judgement in highly contentious case centred on the rejected business interruption claims that many large insurers have turned down due to the Covid-19 pandemic. With large numbers of mainly small businesses reporting problems when claiming on their business insurance policies, the final judgement in the case will have huge implications for over 350,000 businesses involving claims totalling just under £1.3bn.

The crux of the claim is based on the fact that during the UK’s first Covid-19 lockdown, many businesses were unable to operate, often because they weren’t able to access their business premises or because the type of business meant that working from home was not a viable alternative. Many of these businesses turned in good faith to the business interruption clauses contained within their business insurance policies. Despite many of these policies costing many thousands of pounds per year, a significant number of insurers have so far refused to pay out, citing that the disease clauses contained within the ;policies did not cover a Covid-19 type scenario.

FCA Test Case

City regulator the Financial Conduct Authority (FCA) brought a High Court test case, with 8 insurers agreeing to take part in proceedings. Judges found that most, but not all, of the policies involved should pay out offering a potential lifeline to many of these small businesses. However, many have still had to wait while the proceedings were fast-tracked to the Supreme Court. The High Court looked at 21 policy types as part of the test case, and rulings on 13 have been appealed against. Of these, the lower court said 11 should have led to payouts, a decision which is now being appealed against by insurers. Judges said two should not pay out, and these are the subject of appeal by the FCA.

For two insurers, Zurich and Ecclesiastical, the judgement found entirely in their favour and the FCA decided not to appeal against the findings. The final ruling by the Supreme Court judges will provide authoritative guidance for the other policies, and potentially of similar ones not part of the case. The Supreme Court will give judgement some weeks after what is expected to be a 4 day hearing, with the FCA expecting insurers to respond quickly to the final judgement should the result means they are required to do so.

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