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High Court Rules on COVID-19 Insurance Test Case

In a welcome development for thousands of small businesses, the High Court has ruled that losses arising from the COVID-19 pandemic are covered by certain business interruption insurance policies.

Many businesses have claimed on their business interruption policies in the wake of the pandemic, but in refusing to pay out on these claims, insurers have argued that the policies were not meant to cover such a situation. The Financial Conduct Authority (FCA) launched a test case on behalf of policyholders, arguing that policy clauses dealing with infectious or notifiable diseases, or non-damage denial of access and public authority closures or restrictions, provided cover for losses resulting from the pandemic. The case was brought 'in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims and the wider market'.

The Court considered 21 sample policy clauses from eight insurers, submitted by the FCA. It concluded that most, but not all, of the disease clauses provided cover. It also ruled that the denial of access clauses provided cover in some cases, but this will depend on the wording of the clause and exactly how the business was affected by the government's response to the pandemic.

The FCA estimates that around 370,000 policyholders could be affected by the Court's ruling. It remains to be seen whether the decision will be appealed.

Further information about the decision can be found on the FCA's website.