LONDON: Britain’s Supreme Court on Friday ruled that insurers must compensate small businesses forced into last year’s initial coronavirus lockdown, potentially a total payout of £1.2 billion.
The ruling “decisively removes many of the roadblocks to claims by policyholders”, the Financial Conduct Authority (FCA) said.
The FCA last year brought a test case, which could affect around 370,000 businesses, over the wording of business interruption insurance policies, which some insurers argued did not cover the Covid-19 pandemic.
In September, the High Court ruled on several “lead” insurance policies issued by eight separate insurers largely in favour of the FCA, which welcomed that judgment as “a significant step in resolving the uncertainty being faced by policyholders”.
The regulator, however, argued the judgment “took something away with one hand after giving more substantially and in detail with the other”, while six of the insurers — Arch, Argenta, Hiscox, MS Amlin, QBE and RSA — also appealed against aspects of the High Court’s ruling.
Following a four-day hearing in November, the UK’s highest court “substantially allowed” appeals brought by the Financial Conduct Authority and the Hiscox Action Group, which represents around 400 businesses insured by Hiscox.
Announcing the Supreme Court’s ruling on Friday, Lord Hamblen said: “The appeals of the Financial Conduct Authority and the Hiscox Action Group are substantially allowed and the insurers’ appeals are dismissed.”
The FCA’s executive director of consumers and competition, Sheldon Mills, welcomed the ruling, saying: “We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible.
“Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps. As we have recognised from the start of this case, tens of thousands of small firms and potentially hundreds of thousands of jobs are relying on this.”
Recently-appointed Business Secretary Kwasi Kwarteng said in a tweet that the Supreme Court’s decision “will be a lifeline for tens of thousands of hairdressers, bars, restaurants and other small businesses that did the right thing and closed their doors to protect the health of the nation”.
Richard Leedham, a partner at law firm Mishcon de Reya who represented the Hiscox Action Group (HAG), said: “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 policyholders, many of whom are in danger of going under.”
Leedham added: “Today’s outcome is one of the most significant for business in modern times. The result should leave Hiscox and the rest of the insurance industry in no doubt that they should immediately start doing the right thing and settle these claims.”