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Supreme Court backs agencies in Business Interruption Insurance dispute

There's good news for thousands of estate agencies awaiting pay outs under Business Interruption Insurance schemes.

The agents are amongst 370,000 businesses whose claims had been disputed by their insurance firms; the insurers stated that the Coronavirus pandemic was not covered in the policies.

But this morning a Supreme Court ruling appears set to force insurers to pay out on the disputed claims. 


In November a Supreme Court appeal completed a four day hearing on the issue, which in turn had followed a High Court ruling back in September favouring policy-holders against insurers who claimed their BI policies did not include Coronavirus.

The test case involved a sample of 17 insurance policy wordings collated by the FCA, and which it said captured the majority of key issues in dispute between insurers and policy holders.

The FCA’s 184-page claim named eight companies - Arch Insurance (UK); Argenta Syndicate Management; Ecclesiastical Insurance Office; Hiscox Insurance Company; MS Amlin Underwriting; QBE UK; Royal and Sun Alliance; and Zurich Insurance.

Paul Smethurst, a partner and forensic investigation specialist at accountancy firm Menzies LLP, says: “Most of those that have been waiting for a resolution of their existing claims will now receive the compensation they are due. 

“However, many will still need to study the small print of their policies to check what the Court’s decision means for them – only sample wordings were considered and underwriters may seek to distinguish their particular policy terms albeit a clear message has been sent to the insurance community regarding liability for claims.

“While both the appeal hearing and the original case have been expedited, it is still possible that some businesses will have failed before finding out that their claim will be paid. In these circumstances any claim and the money resulting from a payout will be for the benefit of the insolvent estate and used to pay back creditors. 

“With another national lockdown now in place, there is potential for more business interruption claims to be made in the weeks and months ahead. However, businesses should seek legal advice regarding the wording of their policy before bringing a claim. They should also aim to provide the right package of support information, including evidence of forced closure or inability to trade, along with evidence of contracts that failed to convert and estimated trading losses.

“The fallout from this case will be both positive and negative for businesses. Premiums will increase as insurers seek to recoup some of their losses perhaps with the requirement to buy separate pandemic or disease coverage and policy wording will certainly be tightened - particularly in clauses related to the circumstances of business interruption claims. 

“While today’s Supreme Court ruling provides clarity for many claimants, it is unlikely to provide a clear-cut resolution for all. There are still a number of un-tested issues, which could give rise to further litigation. For example, the question of aggregation and whether insurers should accept that the disruption caused by the pandemic is one event or more.”


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