Article written and provided by Sophie Kingwell- Meader, Account Executive at Estate Insurance Group, for Beacon Gainer, private wealth advisory services group.

What was the Supreme Court Judgement?

The insurance market, like all areas of commerce in the UK, has been affected by COVID-19. The majority of insurers had very tight wordings around pandemics that only covered a pre-specified list, however, a select few did not which resulted in a test case being brought against them in the High Court. The result of the case in the High Court and now the Supreme Court has found in favour of the insureds. The judgement states that Hiscox, Arch, Argenta, MS Amlin, QBE and RSA have sufficiently unrestricted wording for non-property Business Interruption (BI) policies to pay claims arising from government shutdowns.

Wider Implications

The Supreme Court judgement has implications for around 370,000 mostly small, independent businesses with potential settlements of up to £1.2bn. The final Supreme Court ruling also provides authoritative guidance for the other policies, and potentially of similar ones not part of the case. For example, the Financial Ombudsman Service and courts in Scotland and Northern Ireland are expected to use the judgment to rule on other, similar cases. The recent judgement also overturns previous precedent for financial compensation in a wider economic downturn – the ruling states that clients who have valid claims are to be compensated to 2019 levels, irrespective of the economic effects of COVID-19 in 2020. The ruling’s precedent is likely to impact other larger insurance events that impact the local economy in the future both in the UK and abroad, such as pay-outs to businesses affected by California wildfires or US hurricane season.

Affected Businesses

Many businesses who have been following the test case through both Courts are now expecting their insurance to pay out on their claims, however, the test case and ruling only covers very specific insurers and policy types. The policies affected by the judgement are Standalone Business Interruption and/or associated Commercial Combined or Office operating insurances only. Any claims on Property Owners policy with Loss of Rent, either commercial or residential, are not valid and any loss of income grants or loans remain the responsibility of the UK government. Likewise, businesses that have the noted insurances but placed with insurers not named in the test case may not have a valid claim. Although the judgement has caused insurers across the market to re-review their claims liabilities, if they are not the named six, the insurer has no obligation to change their stance on previously declared claims or accept liability for new claim submissions.

How can your Broker help?

The majority of brokers are in the process of doing a full review of BI, Commercial Combined, and Office policies placed with the named insurers and are working with those clients to re-register claims. Payments and settlements are likely to be slow to be released as each policy will need to be re-reviewed on an individual basis, as well as there being a delay while insurers process the volume of “new” claims. Ask your broker what is a realistic timeline for the claim to be settled is and continue to avail of any government help in the meantime – although the ruling has been passed, the insurance market and those affected are a long way off closing the case.