Thousands of hospitality operators have been thrown a lifeline after the Supreme Court ruled in favour of policyholders in a landmark business interruption insurance case.
In a judgement handed down today the court "substantially allowed" an appeal by the Financial Conduct Authority (FCA) and the Hiscox Action Group.
It means many thousands of policyholders will now have their claims for coronavirus-related business interruption losses paid.
Insurers Arch, Argenta, Hiscox, MS Amlin, QBE and RSA had their appeals dismissed.
Many insurance companies declined to pay out following the enforced closure of hospitality businesses last March, arguing that business interruption policies did not cover a government-imposed lockdown.
This prompted the FCA to bring a test case on behalf of policy-holders seeking to clarify the issue, and in September the High Court ruled that Covid-19 claims should be paid in most cases where policies had pandemic or notifiable disease clauses.
Both the FCA and six insurers appealed the decision in the Supreme Court in November.
Around 370,000 policyholders were affected by the initial High Court ruling, with many tens of thousands impacted by today's result.
Sheldon Mills, executive director, consumers and competition at the FCA, said: "Today's judgment decisively removes many of the roadblocks to claims by policyholders.
"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."
Manoj Vaghela, partner at law firm Charles Russell Speechlys, said the ruling provided a "light at the end of the tunnel" for businesses. He added : "In practical terms, this allows businesses to recover losses caused by Covid-19 cases within, for example, a 25 [mile] radius of their premises even if it would still have suffered loss of turnover because of Covid cases outside of that area."
Michael Kill, chief executive of the Night-Time Industries Association (NTIA) said: "This is a moral victory for thousands of businesses with Hiscox Business Interruption Insurance, that have been placed under unnecessary financial hardship because of the legal process that has been drawn out much longer than was necessary by insurers.
"We still have some detail to interpret on many of the other policies that have been reviewed by the Supreme Court, and will update throughout the day on the results
"It is now very important that insurers do the right thing and expedite the payment process."
Huw Evans, director general of the Association of British Insurers, said: "All valid claims will be settled as soon as possible and in many cases the process of settling claims has begun. Some payments have already been made where valid business interruption claims have not been impacted by the test case ruling.
"We recognise this has been a particularly difficult time for many small businesses and naturally regret the Covid-19 restrictions have led to disputes with some customers."
The insurance industry expects to pay out over £1.8b in claims related to the pandemic, including through business interruption policies.