A test case has started in the Supreme Court to determine once and for all whether business interruption cover taken out by thousands of small firms applies to shutdowns forced on them by COVID-19.
Around 200,000 policyholders have yet to receive any payment from their policies in spite of the enforced lockdown in March, with insurers arguing that the policies did not cover the measures taken by the government.
Stephen Meade, a partner at Capital Law, which advises more than 100 small firms, said that the case is about decency.
“Many businesses are struggling to survive, and holding off payment, at this stage, is morally contestable,” he told The Guardian.
According to the Association of British Insurers, the industry’s trade body, the cost of the claims is £900mln, but the FCA has also appealed the original High Court ruling and wants the areas that would be covered by the policies to be widened.
The hearing is scheduled to run for four days with broker Peel Hunt saying the arguments will centre on a specific point of the High Court’s judgment (ie a technicality that affects the level of indemnity) or a key point of principle.
“We believe the key risk for the insurance industry is a material widening of cover beyond those businesses that were mandated to close back in the spring, as this could significantly increase the overall indemnity.”
Since the September ruling, RSA Insurance has received a takeover approach from Canadian group Intact Financial that values it at £7.2bn.