Viewpoint: Covid business interruption insurance claims are still there for the taking

Hundreds of thousands of businesses holding business interruption insurance found their policies contained clauses covering them for losses caused by ‘infectious disease', ‘prevention of access', or ‘action of competent authority'. These terms appeared to correspond to the circumstances of the UK lockdowns and many policyholders reasonably thought their insurers would therefore pay claims for loss of gross profit and increased costs of working occasioned by the lockdowns.

Sadly, the insurance industry's unanimous response was that pandemics were uninsured, and that any relevant clauses in policies only responded to more localised outbreaks of disease rather than the national scale of the pandemic.

The insurers' regulator, the Financial Conduct Authority (FCA), took action. It launched a test case in April 2020 to establish whether the typical policies held by hospitality businesses did in fact provide coverage for Covid-19 business interruption (BI) losses. In January 2021, the UK Supreme Court ruled that most of the wording under consideration did cover losses caused by the lockdowns.

The FCA estimated at the time of launching the test case that 370,000 businesses held policies of the type considered by the court. So why, over three years later, have only 43,0000 claims been paid according to the latest figures submitted by insurers?

One reason may be continuing efforts by insurers to restrict the application of the Supreme Court ruling to very narrow facts, requiring further litigation to be pursued by the likes of Stonegate Pub Company, PizzaExpress, the ExCel Exhibition Centre and Liberty Retail. These cases have further clarified the extent of coverage available for Covid-19 BI losses. They have also tested further issues outside the scope of the FCA test case, including whether insurers are entitled to take the benefit of furlough payments received by the policyholder and the treatment of claims by businesses with multiple premises.

Some claims that insurers initially declined may now therefore have become valid as a result of the more recent litigation. Other businesses may simply not have known that coverage was available and may never have notified a claim. In most cases, it is not too late to pursue a claim, and no further litigation will be necessary.

The first step is to locate the relevant policy documents in force at the time of the first national lockdown in March 2020. If these are not immediately to hand, the business's insurance broker will be able to provide copies.

Legal and forensic accountancy advice will be required to present and value any claim for business interruption. Businesses can visit the Stewarts Covid Claims Service for more information and to upload policy documents for a free review.

Aaron Le Marquer is a partner and head of policyholder disputes at law firm Stewarts.