11 Dec Supreme Court hears £900 million business interruption case

Supreme Court hears £900 million business interruption case

The Supreme Court case that will determine whether small and medium sized businesses will receive business insurance pay-outs for losses caused by Covid-19 is being heard, following a hearing at the Divisional Court in July.

This so-called “leapfrog” Supreme Court appeal has allowed the parties concerned to bypass the Appeals Court so that a decision can be reached quickly by five Supreme Court justices who will make ruling on business insurance policy hybrid clauses, disease clauses and prevention of access clauses.

A huge case with major ramifications

The case will see the court hear arguments from 31 barristers, including 13 QCs, representing the Financial Conduct Authority as well as eight business insurance companies, including Arch Insurance (UK) Ltd; Argenta Syndicate Management Ltd; Hiscox Insurance Company Ltd; MS Amlin Underwriting Ltd; QBE UK Ltd; Royal & Sun Alliance Insurance plc; Ecclesiastical Insurance Office; and Zurich Insurance Plc.

Day two of the case saw lawyers set out a variety of views regarding the use of trends clauses and business interruption clauses. One lawyer accused the FCA of “hair splitting wordsmithery” during earlier hearings. It was also argued that there is nothing remarkable about exclusion clauses that limit the scope of cover; “that is the purpose of an exclusion clause”, one lawyer argued.

It was also heard that for a business insurance policyholder to make a successful claim for business interruption, it would have to “establish that it would not have suffered the relevant interruption ‘but for’ the occurrence of notifiable disease within the relevant radius”.

The implications

The case has the potential to have huge ramifications. In the months since the initial UK coronavirus lockdown there have been tens of thousands of small and medium sized business closures, including restaurants, bars, gyms shops and hairdressers; the case is thought to be worth about £900 million and will have a real-world impact for around 200,000 policyholders, most of whom have not yet received a single penny despite making claims on their business interruption insurance for their COVID-related losses.

However, any forthcoming ruling is unlikely to draw a line under the matter. This round of litigation is possibly only the start and there are likely to be many more disputes over related business insurance issues.