News & Insights: Commercial

Business Interruption Insurance and Covid-19 – Can Your Business Benefit?

22 January 2021

Covid-19 has resulted in untold financial hardship for businesses across Northern Ireland, but a recent judgment handed down by the Supreme Court bodes well for the many shops, pubs, restaurants and other business owners who have been affected.

In the test case of The Financial Conduct Authority v Arch and Others, the Supreme Court allowed the appeal brought by the FCA on behalf of policyholders of business interruption insurance. The FCA sought clarity on the extent of the coverage provided by business interruption insurance, namely whether a policyholder could rely on this kind of policy for losses caused by the Covid-19 pandemic.

Business interruption insurance is commonly used where a business suffers a loss due to the interruption caused by a fire, flood, or other similar natural disaster. In recent months, many small business owners made claims through business interruption insurance policies for loss of earnings when the Coronavirus pandemic, and subsequent lockdown, forced them to close their doors. However, a number of insurers refused to pay out to policyholders on such grounds, arguing that the wording of these policies meant that they did not apply to Covid-related losses.

The Supreme Court ruling now means that small and medium sized enterprises may be eligible to receive payments if they hold a relevant business interruption insurance policy. This ruling will now make it difficult for insurers to deny cover or reduce an indemnity on the basis that the loss would have resulted in any event from ‘non-damage perils’ caused by the Covid-19 pandemic.

We can expect to see the Financial Ombudsman service and the NI courts follow the guidance provided by this ruling in future cases. Insurers should now contact relevant policyholders to make payments, but it is recommended to all business owners to consult your own policy if you feel you may have relevant cover for business interruption.

Contact our Commercial Litigation department for further advices in relation to business interruption insurance and other related queries.

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