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Small Firms to Receive Insurance Pay-outs After Losses from Lockdown

20th January 2021

The Supreme Court has ruled that insurance companies must now award small firms their due payments as a result of business interruption during the first period of national lockdown.

This case originates from the spring of 2020, when businesses were forced to close their doors for the first time as COVID-19 began to spread across the country. Many small firms opted to claim from their insurance providers who had offered a variety of interruption policies, prior to the lockdown, to compensate a loss in earnings.

However, insurers refused to pay-out after citing how unprecedented the situation and circumstances were.

Whilst businesses were undoubtedly outraged at this decision, the FCA (Financial Conduct Authority), a lobby group based in the City of London, looked to seek justice on behalf of those and successfully campaigned against a group of insurance companies.

Similarly, a COVID Claims Group was set up in order to offer small companies’ guidance and support after not receiving their insurance payment.

The case, heard in England and Wales’ highest court, also focused on the wording that insurers had used in writing the interruption policy in an attempt to provide further clarity on clauses which encompass ‘disease’ as a factor for pay-out.

It was estimated that thousands of small firms should now receive appropriate payment from their insurers after the Supreme Court judgement. In the current climate, this could prove to be critical to securing their survival. Many struggling commercial tenants have cited continuing rent demands as a constant worry during the pandemic; the interruption policy ruling will help business address, or recover from, these obligations.

Subsequently, insurance companies will look to be explicit in their policy wording, to ensure that such a case never materialises again. However, it is hoped that the ruling will set a precedent for future policy disputes arising from the harsh economic environment created by the pandemic.  

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