Insurance companies must pay small retailers for lockdown losses, rules the Supreme Court

Insurance companies have been ordered by the Supreme Court to pay small firms claiming for loss of earnings in the first lockdown through business interruption policies.  

The landmark ruling could benefit 370,000 small businesses in the UK, paying out an estimated £1.2 billion to shops, pubs and restaurants that have been forced to close during the pandemic.

Many insurers initially refused to accept claims from small firms when the first lockdown was imposed, arguing that only the most specialist polices cover such unprecedented restrictions.

The City regulator brought a test case last year after thousands of businesses complained they were unable to claim on their insurance policies. High court judges were asked to rule on whether the wording used in numerous typical insurance policies meant they were required to cover losses created by covid restrictions. The case was fast-tracked to the Supreme Court, which ruled that insurers should pay out in most cases.

Mike Cherry, national chair at the Federation of Small Businesses, comments: “Today’s judgement is a big victory. It cements the high court’s decision to grant businesses left on the brink the insurance pay-outs they are rightfully owed. For many, it has been a long and difficult road to get to this stage so this will bring clarity and hope to the thousands of firms which have been left in financial limbo for almost a year.

“While this is good news, and while the law has to follow procedure, it’s disappointing that so many small businesses have had to wait to get the money they desperately need under policies they believed were there to protect them, policies they bought in good faith.

“Businesses deserve to be protected in a timely way, but instead they have been failed by their insurers and are now trying to make up for lost time. Providers must now pay-out quickly, and consider the steps they can take to progress these claims in a swift and seamless manner. Any paperwork required of claimants shouldn’t be onerous or time-consuming. 

“Small businesses contribute trillions to the economy. The Financial Conduct Authority (FCA) was right to argue that disease or denial of access clauses within interruption policies should trigger pay-outs in the event of coronavirus-linked disruption. We are hugely grateful for its work in this space.”

The payouts could help thousands of independent retailers continue to trade until businesses are to reopen later this year.

Photo by Tim Mossholder on Unsplash