The Hull & Humber Chamber of Commerce has welcomed a landmark Supreme Court ruling which says insurance companies must cover the losses of some small businesses from the first lockdown.
The ruling, which could provide a lifeline for tens of thousands of small businesses in our region, means small firms could now receive payments from business interruption insurance policies. However, a leading insurance specialist is urging caution.
The Financial Conduct Authority (FCA) brought the test case after insurers refused to pay when many small businesses made claims through business interruption policies for loss of earnings when the Government told them to close as part of the first national lockdown.
The Director of the Chamber Acorn Fund, Craig Simpson, welcomed today’s news. He said: “Today’s decision will be seen as a landmark victory for many small businesses in the short term. These firms paid their insurance premiums in good faith before the pandemic began.
“Following the Supreme Court ruling it is hoped that the insurers settle claims quickly to give small businesses a cash lifeline to which they are legally entitled.
“Some of these claims have been pending for almost a year and the delay in settling claims has added pressure onto businesses during what have been very difficult times. Over 370,000 could benefit from today’s court ruling, but sadly some have been forced to close down whilst waiting for this decision.
“Along with small businesses, large insurance companies are there to make profit. Ultimately it is the policyholders who pay their insurance premiums which generates that profit. It will be interesting to see if the insurance market continues to offer such pandemic cover in the future and if premiums are increased to cover the cost of the Court ruling announced today.”
However, former Chamber President and insurance specialist, Steve Eastwood, from Alan Boswell Insurance Advisers Ltd, urged caution. He said: “I have been following developments in the case brought by the FCA closely and have to say that some of the comments in the media have unfortunately failed to adequately report the true situation.
“The test cases were brought to clarify the situation with regard to a number of policy wordings which were ambiguous in the eyes of policyholders and the regulator. For example, many policies cover named or specified infectious diseases, and as Covid-19 did not appear on the list, it was clear from the outset that there is no cover. This result of this case does not change that position.
“Policies that do not have a specified diseases extension also have other clauses detailing what must have happened in order for a claim to be valid. The Supreme Court also looked at non-damage denial of access, again this is a cover that does not appear in all Commercial Insurance policies, so many existing policies are not affected by the decision.”
Business owners who think this ruling may affect their claim, should contact their insurance provider for clarification.