High Court tentatively rules in favour of businesses in insurance claim case

The Staff Canteen

The UK High Court has ruled in favour of thousands of businesses whose Business Interruption claims were turned down by their insurance firms due to the unforeseen nature of the Covid-19 pandemic, in a test case put forward by the financial conduct authority

Many in the hospitality industry will likely applaud the decision, as their businesses were brought to a halt when lockdown was imposed in March until they were allowed to reopen in July.

High profile cases include chef Raymond Blanc, whose insurance covered the Brasserie bar co group as well as his two Michelin-starred establishment, Le Manoir Aux Quat' Saisons

The gridlock prompted the creation of the Hiscox Action Group, which launched a £40m arbitration claim on behalf of 350 businesses whose Hiscox insurance claims were turned town on the basis that the company's property business interruption policies contained exclusions for the risk of pandemic.

What next?

While the judgment will bring welcome news for many, it did not say that insurers are liable across all of the 21 different types of policy wording considered by the Court, and each policy will still need to be considered against the detailed judgment to work out what it means for that policy.

Policyholders with affected claims can expect to hear from their insurer within the next 7 days.

In a statement, the FCA explained that the test case was not intended to encompass all possible disputes,nor does it determine how much is payable under individual policies, "but will provide much of the basis for doing so."

Christopher Woolard, Interim Chief Executive of the FCA, said:  "We brought the test case in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims and the wider market."

"We are pleased that the Court has substantially found in favour of the arguments we presented on the majority of the key issues. Today’s judgment is a significant step in resolving the uncertainty being faced by policyholders. We are grateful to the court for delivering the judgment quickly and the speed with which it was reached reflects well on all parties. 

"Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful.

"Insurers should reflect on the clarity provided here and, irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgment says should be paid.  They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.

"If any parties do appeal the judgment, we would expect that to be done in as rapid a manner as possible in line with the agreement that we made with insurers at the start of this process. As we have recognised from the start of this case, thousands of small firms and potentially hundreds of thousands of jobs are relying on this."

No time for relent

Forensic partner at accountancy firm HW Fisher Rafi Saville called today's events "a landmark case and one of the most controversial legal issues resulting from the coronavirus crisis, adding that "today’s decision will affect over 400,000 small and medium businesses particularly in the leisure, property and hospitality industry who were forced to close their doors back in March.

"The ruling is likely to considered as a partial victory and it could have a ripple effect for the entire marketplace, with its conclusions likely to be applied to other affected claims. However, the decision today could possibly add to the confusion experienced by many business owners."
However, he added, “it is now crucial for these businesses to pay attention. Although the ruling may well be subject to an appeal, it becomes even more necessary for businesses to consult their insurance documentation with a view to understanding whether their Covid related losses will be covered. At this early stage, we understand that policies covering “notifiable diseases” will be covered under the ruling.”

UKHospitality chief executive Kate Nicholls tentatively celebrated the ruling - as there is still scope for the decision to be overturned in an appeal.

Chef Peter Lloyd echoed the relief likely felt by many of his peers, thanking the Financial Conduct Authority for taking the test case to court.

In these challenging times…

The Staff Canteen team are taking a different approach to keeping our website independent and delivering content free from commercial influence. Our Editorial team have a critical role to play in informing and supporting our audience in a balanced way. We would never put up a paywall  – The Staff Canteen is open to all and we want to keep bringing you the content you want; more from younger chefs, more on mental health, more tips and industry knowledge, more recipes and more videos. We need your support right now, more than ever, to keep The Staff Canteen active. Without your financial contributions this would not be possible.

Over the last 16 years, The Staff Canteen has built what has become the go-to platform for chefs and hospitality professionals. As members and visitors, your daily support has made The Staff Canteen what it is today. Our features and videos from the world’s biggest name chefs are something we are proud of. We have over 560,000 followers across Facebook, X, Instagram, YouTube and other social channels, each connecting with chefs across the world. Our editorial and social media team are creating and delivering engaging content every day, to support you and the whole sector - we want to do more for you.

A single coffee is more than £2, a beer is £4.50 and a large glass of wine can be £6 or more.

Support The Staff Canteen from as little as £1 today. Thank you.

The Staff Canteen

The Staff Canteen

Editor 15th September 2020

High Court tentatively rules in favour of businesses in insurance claim case