Small companies obtain payouts for coronavirus insurance coverage following a landmark Supreme Courtroom ruling

Following the ruling, more policyholders now have valid claims against insurers for disruptions they were exposed to as a result of the pandemic. The Supreme Court ruled that insurers must pay for partial closures – as well as full closures – and mandatory closure orders that are not legally binding. More insurance policies have also been included in its decision – for example, two policies from insurer QBE.

In addition, small businesses may now be able to claim more cash than expected. This is because the Supreme Court said valid claims should not be reduced because companies would have suffered losses anyway even if they weren't told to close. Insurers say they will contact affected customers to discuss their claim after the verdict. You can find further instructions in our Help for Coronavirus Self-Employed & Small Limited Company.

What's the story of this case?

This is a complicated problem. Here is a quick rundown of what happened so far:

  • July 2020: The Financial Conduct Authority (FCA), a city watchdog, took a test case to court over the wording of business interruption insurance policies after some insurers claimed they did not cover the Covid-19 pandemic.
  • September 15, 2020: The High Court ruled that some insurers should pay small businesses for losses caused by the coronavirus lockdown. However, the FCA later stated that while the ruling "paved the way for many payouts," it did not clarify the position of all companies – and therefore appealed to the Supreme Court.

    Six of the insurers involved in the case also appealed aspects of the High Court's ruling, as did Hiscox Action Group, which represents around 400 companies insured by one of the insurers – Hiscox.

  • January 15, 2021: The Supreme Court ruled in favor of the FCA and the Hiscox Action Group and dismissed the insurers' arguments.

It's unclear how many people are affected by this latest ruling – as some companies have already received insurance payments after the previous court ruling – but the FCA's original case is believed to have affected around 370,000 companies. According to the Association of British Insurers (ABI) trade organization, the insurance industry expects Covid-19 claims to be paid out in excess of GBP 1.8 billion.

While this decision is about business interruption insurance, founder Martin Lewis said when the case was first brought up that a key question was whether this could have further implications for other insurers. We asked the Financial Conduct Authority and will update this story when we know more.

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