Insurers lose Business Interruption Insurance Appeal

legal updates

Business Interruption insurance came to prominence in 2020 due to the policies which have cover for disruption caused by infectious/notifiable diseases.

Read our disclaimer keyboard_arrow_down

This website content is intended as a general guide to law as it applies to the motor trade. Lawgistics has taken every effort to ensure that the contents are as accurate and up to date as at the date of first publication.

The laws and opinions expressed within this website may be varied as the law develops. As such we cannot accept liability for or the consequence of, any change of law, or official guidelines since publication or any misuse of the information provided.

The opinions in this website are based upon the experience of the authors and it must be recognised that only the courts and recognised tribunals can interpret the law with authority.

Examples given within the website are based on the experience of the authors and centre upon issues that commonly give rise to disputes. Each situation in practice will be different and may comprise several points commented upon.

If you have any doubt about the correct legal position you should seek further legal advice from Lawgistics or a suitably qualified solicitor. We cannot accept liability for your failure to take professional advice where it should reasonably be sought by a prudent person.

All characters are fictitious and should not be taken as referring to any person living or dead.

Use of this website shall be considered acceptance of the terms of the disclaimer presented above.

Many small businesses have Business Interruption insurance. 

A successful claim will compensate you for any shortfall in profits and any increase in running costs in the event of the business not being able to trade due to an unexpected event such as a fire, storm or flood or the breakdown of essential equipment.  You can also insure against a supplier being interrupted which affects you.

The reason that Business Interruption insurance came to prominence this year however was that some policies had cover for disruption caused by infectious/notifiable diseases, known as ‘disease clauses’, and some insurers refused to pay out on the terms of those policies.

Therefore, in a bid to clarify whether insurers should or should not pay out under the policy the Financial Conduct Authority (FCA) issued a statement in May to advise that they were issuing a test case in the High Court. 

It is worth pointing out that every policy is different, and the test case will not determine every case, the FCA said at the time:

The range of wordings and types of coverage are sufficiently broad in the Business Interruption market that it is difficult to determine at a general level the degree to which any one individual customer may be able to claim.

Their Particulars of Claim included 19 different samples of policy wordings that crop up regularly to allow the Court to determine a broad range of scenarios.  The insurers position is summed up as being that this type of insurance was never designed to cover this particular scenario which affected everyone, but was rather for local outbreaks such as legionnaires etc. 

The first case was heard in the High Court and the Judgment delivered on 15 September. However, due to the importance of the case, and the necessity to have a definitive outcome that could not be revisited at a later stage the FCA immediately appealed the decision on a leapfrog basis. The High Court agreed that it should skip the Court of Appeal and head straight to the Supreme Court, unfortunately no longer adorned by Brenda’s Brooches. 

The Case was heard for 4 days in front of 5 Supreme Court Judges via Videolink from 16 November and we now have the Judgment dated 15 January 2021.

It would be a dry old article, and you would probably still be reading this tomorrow if I dealt with every scenario, but the main point to take away is that the Supreme Court have ruled in favour of the FCA, Business Interruption Insurance should cover any downturn due to Covid, subject to the terms and conditions of the policy relating to quantum.


Need help with keeping on track with FCA Regulation and Compliance? Partner with Automotive Compliance

So if you have a disease clause in your Business Interruption insurance that may have covered you, speak to your broker immediately as in most scenarios the insurers will need to compensate you.

As the Supreme Court have reached this Judgment the insurers cannot appeal any higher so payments should be made swiftly, subject to scrutiny of any claim made.

Darren FletcherLegal AdvisorRead More by this author

Related Legal Updates

Court management service raises money for charity

Members can leave the legal worries to us and can focus on their core business of selling vehicles, running their service and repair garages, and/or MOT testing centres.

Unlawful attempt to wind up car dealer’s company thwarted

The expression “petition” in the legal sense is where (usually) the creditor makes an application to the court.

Customer’s vehicle damaged in your care

It is down to the Bailor to check the insurance position with the Bailee if they have any concerns.

Pandemic impact on annual leave entitlement

The change in March 2020 allowed for four weeks of annual leave to be carried over. So, as a reminder, any carried over leave must be used in 2022!

See you in court… in a year or so…

Before deciding to issue or defend proceedings, it is important to consider how court delays may impact you as a business and as an individual.

Personal Injury Claims

Your insurers will know exactly what to do to ensure the rules are followed, and therefore, the Claimant will not win on a technicality.

End of COVID-19 restrictions – Employment implications

Until 24 March 2022, Statutory Sick Pay (SSP) will continue to be available to employees who self-isolate.

Get in touch

Complete the form to get in touch or via our details below:

01480 455500

Vinpenta House
High Causeway

By submitting this quote you agree to our Terms & Conditions and Privacy & Cookies Policy.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.