Will Insurers Really Pay Businesses for Covid Losses?

Recent news reports have revealed that insurers will be asked to foot the bill for some small firms who have lost out financially due to COVID-19 lockdowns.

This follows a court ruling where the Supreme Court found in favour of small companies receiving payments from insurers’ business interruption policies. 

For many businesses, this has been a long time coming.

If your business has been significantly impacted by the pandemic, this news could provide a vital lifeline and enable you to trade your way out of COVID-19 and into a far more positive future.

It paints a less rosy picture for insurance firms, though, who could face a bill running into hundreds of millions of pounds.

What’s the Supreme Court case about?

When the first national lockdown was put in place, many small firms looked immediately to their business interruption policies in order to avert financial ruin. This was particularly the case for those businesses who had no choice but to close their doors.

Unfortunately, some insurers refused to pay out. Their argument was that only the most specialist policies offered cover for unprecedented restrictions like those enforced by the lockdown.

This led to a number of policy wordings being tested in court in order to set a precedent for what could be considered a valid claim.

The new ruling offers guidance for a pool of around 700 insurance policies and could affect as many as 370,000 small businesses in the UK. Arguments from both sides were heard, but favour was given to the cases put forward by policyholders.

“Time matters”

Those were the words of hair salon owner, James Ollerenshaw, when quizzed by the BBC about the need for financial help during this time of crisis.

“A pay-out would cover the major costs, which is the rent,” he said. “We have debt sitting there.”

Ollerenshaw’s desire for fast action will be echoed by countless other small businesses in this country who have had no choice but to shut up shop during each lockdown. Unfortunately, due to the complexity of the ruling, business owners like Ollerenshaw have had to wait quite some time for the decision.

The good news is that the new judgement removes any roadblock to a claim, enabling businesses to finally make substantiated claims for the losses they’ve experienced due to COVID-19.

Will my insurer pay me?

There’s a high chance they will have to, providing you can illustrate a clear loss of business due to the inability to operate during lockdown.

For those operating in the hospitality and retail spaces, that’s a relatively simple task. And the good news is that the test case which was processed during the Supreme Court’s investigations provides authoritative guidance for most business interruption policies.

It will even offer guidance for policies that are similar to the test case, but which were not part of the ruling.

You can also draw significant comfort from the fact that both the Financial Conduct Authority (FCA) and the Financial Ombudsman will now use the judgement while making their decisions on future claims. Courts will also use it to rule on similar cases.

Your insurer should have since amended your policy – so if you’re yet to hear from them, it’s definitely worth a chase. Similarly, if you’ve only recently signed up for a business interruption policy or have renewed an old one since the court ruling, those too should have wording which reflects the new requirements regarding claims.

Is it too little, too late?

Insurance policies are indeed only there for when you need them most, and this is undoubtedly that time for countless businesses in the UK.

For some, it is, tragically, too late, but if you still have hope that you can see your business through this incredibly challenging time, a call to your insurer is now more important than ever.

Of course, the Trinity team is always here if you’re confused by how the ruling might affect you, or if you simply want some friendly, impartial advice. 

Get in touch today and hit us with your questions.

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