A Supreme Court ruling on 15 January 2021 means that many thousands of businesses are now able to claim against their business interruption insurance policies for losses caused by the COVID-19 pandemic.
A significant number of policyholders had previously been rejected by insurers for their claims – though the majority will now have their claims validated. This latest ruling has provided a lifeline to businesses already suffering due to national restrictions in place throughout 2020.
Whether you’re able to claim or not depends both on your insurance policy and the impact that the pandemic has had on your business. We cover the key developments of the latest ruling here.
What has changed for small business insurance claims?
The Supreme Court ruling applies only to business interruption insurance policies. It outlines that insurers must pay out against valid policies where coronavirus has caused business losses.
The Financial Conduct Authority (FCA) successfully appealed on behalf of policyholders who had their claims rejected for coronavirus-related business losses. These businesses, and many thousands more who are yet to claim against their policies, are now able to receive payments from their insurers.
Why couldn’t businesses claim for loss of earnings during the pandemic?
This wasn’t a one-off case; insurers were rejecting claims by the thousands for losses incurred during the pandemic. For business interruption policies that also included cover for infectious diseases or authority closures or restrictions, some insurers were paying out while others weren’t.
The inconsistent approach from insurers lead to many small businesses finding themselves in an uncertain situation, during already uncertain times. The FCA sought clarity across policies and insurers, with the Supreme Court ruling in the policyholder’s favour.
When will I receive my business insurance pay out?
The ruling didn’t include any guidelines around payment schedules, only that eligible claims for coronavirus-related losses should be paid out. Insurers have indicated that payments will occur as soon as possible.
The FCA will be working with insurers to make sure that businesses receive their payments quickly. They also indicate there may be circumstances where interim payments are made to ensure businesses receive much-needed payments sooner, rather than later.
For those with valid cover, this latest ruling means that not only can companies claim for losses due to closure during the first national lockdown, they should now be able to claim for multiple closure periods.
How much am I eligible to claim for under my business insurance policy?
Business interruption insurance typically covers you for loss of income and, depending on the wording of your policy, any profits you would have generated had you been able to operate normally.
The ruling did state that pay-outs should be made for valid claims against both full and partial business closures, as well as for mandatory closure orders that weren’t legally binding. The business interruption claims related to coronavirus are estimated to be worth in total at least £1.2bn.
If you have already made a claim against your business interruption policy and it is affected by the latest Supreme Court ruling, your insurer should be in touch with you to reassess, review or pay out on your claim. If you are yet to submit your claim, contact your insurer to discuss whether you are eligible.
What is business interruption insurance?
In its simplest terms, business interruption insurance provides cover for businesses which lose income because the business can’t operate due to an unexpected event. Unexpected events typically include fire or flood damage to business premises, or essential equipment failing.
But more recently, policyholders have been looking to their business interruption insurance to support them during enforced national lockdown periods where they were unable to operate their business. It’s usually included as part of a broader business insurance policy, or as an add-on at the time of purchase.
Does my insurance cover me for COVID-19 losses?
The best place to start is with your policy. Review your documents to understand the type of coverage you have, and note the dates it’s valid.
Your next port of call will be to speak directly with your insurer, even if you’re not sure about making a claim. Understand what your rights are so you know where you stand if you do need to claim.
Should I take out business interruption insurance?
Business interruption policies aren’t usually taken as a standalone policy, but it does cover you for loss of income due to fire or flood, for example.
Although it’s unclear whether future policies will now exclude losses caused directly or indirectly by the coronavirus pandemic, it is still wise to consider reviewing your insurance policy.
How has your business been affected by COVID-19? Let us know in the comments below!