Supreme Court orders insurers to pay claims to small firms for Covid lockdown losses

Supreme Court orders insurers to pay claims to small firms for Covid lockdown losses

Thousands of small businesses are set to receive previously refused insurance claim payments covering losses from the first national lockdown last year, following a court ruling.

Supreme Court judges found in favour of small firms receiving payments from Business Interruption Insurance policies.

The ruling provides a lifeline to thousands of small businesses, allowing them to survive the coronavirus crisis, but could cost the insurance sector hundreds of millions of pounds and lead to higher premiums in the future.

The financial watchdog, the Financial Conduct Authority (FCA), brought the test case, with eight insurers agreeing to take part in proceedings.

The major business insurer Hiscox could see huge losses after being challenged by thousands of its policyholders as part of the case.

Richard Leedham, who represented the Hiscox Action Group – on behalf of small businesses, told the BBC: “This is a landmark victory for a small group of businesses who took on a huge insurance player and have been fully vindicated.

“What is important now is that Hiscox accepts the Supreme Court’s verdict and starts paying out to its policy holders, many of whom are in danger of going under”.

Among the other insurance companies including in the test case are Arch, Argenta, MS Amlin, QBE and RSA – but over 60 insurers offered similar business insurance policies.

Last year, many small businesses made claims through business interruption insurance policies for loss of earnings when they had to close.

Insurers refused to pay the claims, arguing only the most specialist policies had cover for such unprecedented restrictions. Insurance companies use phrases like an “act of God” to wriggle of of paying claims.

Fortunately for policyholders, it was agreed that a selection of policy wordings should be tested in court, setting the parameters for what would be considered a valid claim.

The court ruling provides guidance for over 700 policies, affecting 370,000 small businesses – although not all will benefit.

Many small businesses paid annual premiums of over £1,000 for business interruption insurance, sometimes as part of a package of cover included with liability cover, and disease was covered.

Many business owners formed a ‘Covid Claims Group’, calling for a quick resolution and settlement.

Recent insurance policies would have been amended for new and renewing customers since Covid, so losses from the latest lockdown measures in different parts of the UK would be specifically stated as included, or not, in the cover of newer business interruption insurance policies.

The advice is to read your policy document.

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See also: Have you applied for the new lockdown grants?

By Charles Kelly, Wealth Mentor, Property Investor, Author of Yes, Money Can Buy You Happiness and creator of Money Tips Podcast. See more articles at

There are more examples and practical steps to getting rich and being happy in my book, Yes, money can buy happiness, I cover the 3 R’s of Money Management, the Money B.E.L.I.E.F System and much more. Check it out on Amazon

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