Businesses have been warned not to expect an imminent insurance payout after the High Court finished reviewing the policy wording of eight major insurers to decide whether or not the Covid-19 pandemic should trigger a business interruption insurance pay out.
A final judgement was likely to be due in September.
The High Court has looked at 17 policy wordings from eight different insurers - Arch, Argenta, Ecclesiastical, MS Amlin, Hiscox, QBE, RSA and Zurich - to decide whether Covid-19 triggers a business interruption insurance pay out. Based on other policies that the FCA has studied, the court’s rulings were expected to apply to nearly 50 insurers, who sold insurance to 370,000 customers – mostly small businesses.
Catrin Povey, lawyer at Capital Law, said: “While it’s difficult to predict exactly how the test case will be decided, whichever way it goes, there are likely to be lengthy court appeals and challenges from insureds or insurers, as the judgment will have devastating consequences for the losing party. If the FCA lose, many SMEs may face going under. If the insurers lose, they could face massive costs as they will be liable to pay the claims made under the respective policies, as well as further costs relating to late payment of claims.
“It is highly unlikely that the judgment will draw a line under business interruption claims relating to Covid-19 in any event. The test case has been designed to resolve as much uncertainty as possible, by providing clarity on general contractual uncertainties. But the judgment will not cover all possible disputes in this area, and most cases will be decided on their own facts. The judgment will not determine how much is payable under individual policies either, meaning these claims will be ongoing for some time to come.”
RSA Group said: "It remains the case that the great majority of business interruption claims are not expected to be eligible under their coverage terms for Covid-19, and the court proceedings seek to address the legal interpretation of just a small minority of policies and schemes. RSA continues to treat claims in line with legal advice, precedent and case law.”
Neil Baylis, partner, Mishcon de Reya (which is acting for a group of claimants against Hiscox and for the hospitality sector action group), told us: “I can understand insurers trying to preserve cash flow but it seems to us that the policy wording is very clear in most cases. There was a court case in France where the insurer lost and I am sure that is what will happen here eventually - the trouble is that by that time a lot of insured businesses may have gone under.”