The Supreme Court has ruled insurers must pay compensation to countless companies closed during the first lockdown.
The high-profile business interruption insurance test case was brought by the FCA to seek legal clarity to assist businesses facing uncertainty about their claims.
The ruling in favour of the FCA’s appeal on behalf of policyholders today brings closure to six months of legal wrangling.
It upholds a High Court ruling from September that insurers should have to pay out on claims to businesses which were forced to close during lockdown.
The Supreme Court also upended the controversial 2010 Commercial Court ruling of Orient Express Hotels Ltd v Assicurazioni Generali SpA.
Insurers relied heavily on the Orient Express ruling in their November appeal but the Supreme Court ruled that the case was wrongly decided.
According to an update, on the FCA’s website the Supreme Court’s judgment will be distilled into a set of declarations.
It says the FCA and defendant insurers are working as quickly as possible with the Supreme Court to enable it to issue further declarations.
In the near future the regulator will publish a set of Q&As for policyholders to assist them and their advisers in understanding the test case.
The FCA will also publish a list of BI policy types that potentially respond to the pandemic based on data that will be gathered from insurers.
The FCA has published draft guidance for policyholders on how to prove the presence of coronavirus, which is a condition in certain types of policy.
The consultation closes on 18 January, but the FCA is extending the closing date to 22 January only for any supplemental comments arising from the judgment.
The FCA will issue finalised guidance as soon as possible after that.
FCA executive director for consumers and competition Sheldon Mills says: “Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. This test case involved complex legal issues.
“Our aim throughout this test case has been to get clarity for as wide a range of parties as possible, as quickly as possible, and today’s judgment decisively removes many of the roadblocks to claims by policyholders.
“We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible. Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.
“As we have recognised from the start of this case, tens of thousands of small firms and potentially hundreds of thousands of jobs are relying on this. We are grateful to the Supreme Court for delivering the judgment quickly. The speed with which it was reached reflects well on all parties.”
