Business interruption insurance - finally...a lockdown lifeline


18th January 2021

Many businesses forced to close thanks to COVID-19 were eagerly awaiting last week’s Supreme Court decision to find out if they may be able to recover their losses.

And there was good news.

The ruling meant the majority of policyholders with insurance cover for business interruptions caused by a notifiable disease will now receive payment.

This decision follows a test case involving as many as 60 insurers that had issued business interruption policies.

In response to the lockdown last spring many organisations made claims to their insurers to recover the losses incurred when they had to close.Many of these were rejected for a variety of reasons.

Fortunately, the Financial Conduct Authority stepped in and agreed to test some of the more commonly worded policies in court so it could be determined when insurers would have to pay out.

Last week’s decision signifies the end of the road in this ongoing dispute, and insurers are now being urged to act quickly and make payments without any delay where the court has ruled they ought to.

We’ve been advising a range of clients from sole traders with self-catering accommodation to landlords with a large property portfolio across the likes of the retail and leisure sectors. And the good news is we’re already starting to see positive outcomes.

What now?

For many businesses, in particular smaller enterprises, this decision will sadly have come too late.

That said, the ruling forces insurers to pay out for losses sustained during the first national lockdown last March so, for those that have made it through, this will hopefully be the lifeline they need to carry on trading.

The next step is for insurers to contact businesses that have made claims to discuss how the Supreme Court's decision affects them.

I expect a number of businesses will not want to wait for the phone to ring and instead may want to take proactive measures to find out as soon as possible whether they have that lifeline, or not.

Victoria Leslie, partner, Ledingham Chalmers

Ledingham Chalmers LLP

A full-service law firm with offices in Aberdeen, Edinburgh, Stirling and Inverness, we are trusted advisors for individuals, and organisations across a range of sectors that drive the national economy.

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