Thousands of small businesses will receive payouts from insurance companies to cover losses from the coronavirus pandemic, after a court ruled they had been unfairly penalised.
On Friday, the Supreme Court gave hope to thousands of small businesses after ruling largely in favour of small firms receiving payments from business interruption insurance policies during England’s first lockdown in March.
The City watchdog, the Financial Conduct Authority brought forward a test case, with eight insurers agreeing to take part.
The case found that many insurers had refused to pay out to small businesses for loss of earnings when they were forced to close last spring, arguing that only the most specialist policies had cover for some unprecedented circumstances.
A selection of policy wordings was tested in court, to decide on what exactly should be considered a valid claim. The ruling provides guidance for a wider pool of 700 policies, potentially affecting 370,000 small businesses, however not all of these will receive payouts.
The complex ruling covered issues such as disease clauses, whether business were denied access to the properties, and the timing of lost earnings.
Some of the insurers included in the case are the likes of Hiscox, Arch, Argenta, MS Amlin, QBE and RSA.
Reacting to the news that the Supreme Court has found in favour of small firms, UKHospitality Chief Executive Kate Nicholls said: “Businesses took out policies in good faith and it is right that insurers stick to these agreements and honour claims.
“Should this result in pay-outs to policy holders this could provide an additional lifeline that many businesses desperately need. It could be the difference between keeping staff members on or being forced to let them go; it could mean the survival of a business that was previously staring collapse in the face.”