Initial Reactions to UK Supreme Court’s Ruling on Business Interruption Claims

Initial Reactions to UK Supreme Court’s Ruling on Business Interruption Claims

2021-01-15 17:07:30

Insurers, policyholders and industry observers have commented on the UK Supreme Court ruling that insurers must pay small businesses for many business interruption claims resulting from the COVID-19 lockdowns.

The UK Supreme Court dismissed appeals from six insurers – Hiscox, RSA, QBE, Argenta, Arch and MS Amline – and ruled that “many thousands of policyholders are now filing their claims for coronavirus-related business interruption losses paid. "The insurers had argued that the business interruption policy included pandemic exclusions and should not be covered. Further appeals are no longer possible.

Here are some of the early responses to the Supreme Court's ruling:


Hiscox estimated that his claims for COVID-19-related business interruptions had increased by $ 48 million in 2020 as a result of the ruling, to a total for the year of approximately £ 136 million ($ 186 million). For this year, the claims for business interruption through the end of March 2021 are estimated at $ 20 million, a Hiscox representative said. The insurer welcomed the "clarity" provided by the final judgment and said it has begun to pay for the claims. Hiscox noted that less than a third of Hiscox & # 39; s 34,000 UK business interruption policies are affected by the decision.

Moody & # 39; s Investors Service

"Today's judgment in the FCA's breakdown insurance test case is credit negative for UK insurers and reinsurers as the Supreme Court has ruled in favor of policyholders," said Dominic Simpson, a vice president at Moody's Investors Service. London, in a statement. that the financial consequences of the judgment for individual insurers must be "manageable, excluding reinsurance".

“However, precedents have been set that can broaden the circumstances in which policyholders make future claims. More positively for insurers, the majority of SMB business interruption policies are primarily designed to protect interruption of property damage and do not cover pandemic claims, and the clarity provided by the verdict will help put an end to harmful disputes with customers, ”he added.

The Association of British Insurers

“The insurance industry expects to pay more than £ 1.8 billion ($ 2.5 billion) in COVID-19-related claims for a range of products, including business interruption policies. Customers who have submitted claims affected by the test case will be contacted by their insurer to discuss what the ruling means for their claim, ”said Huw Evans, director general of the Association of British Insurers (ABI).

“All valid claims will be resolved as soon as possible and in many cases the claims settlement process has begun. Some payments have already been made where valid business interruption claims have not been affected by the statement in the test case, ”he added.

“We recognize that this has been a particularly difficult time for many small businesses and, of course, regret that the COVID-19 restrictions have led to disputes with some customers. We will continue to work together as an industry to ensure that customers get the clarity they need when it comes to what to expect from their business insurance policies. "


Today's groundbreaking Supreme Court ruling on the FCA's business interruption (BI) insurance case for COVID-19 claims is one of the most important legal issues of the past decade. Affected policyholders will welcome the ruling to the insurers' appeal unanimously rejecting and substantially allowing all four of the FCA's appeals in favor of policyholders, & # 39; & # 39; said John Ludlow, CEO of Airmic, the UK risk management association.

“To somewhat illustrate the significance of this morning's Supreme Court ruling, the FCA has estimated that around 370,000 policyholders would be affected by today's Supreme Court decision, paving the way for up to £ 1.2 billion ($ 1.6 billion) in BI claims, with 700 policy types, from 60 insurers, ”said Julia Graham, deputy CEO and technical director of Airmic.

Hiscox action group

"The verdict should provide a huge boost to all companies reeling from a third lockdown that can now demand that their claims be paid," said Richard Leedham, a partner at law firm Mishcon de Reya who represents the Hiscox Action Group. Leedham was quoted in a Reuters article.

"The hope and expectation of our customers is that the claims adjustment process will start immediately and that insurers will not continue to cause further unrest from further unnecessary delay."

Reed Smith, British law firm

“Without fear of exaggeration, it can be said that in principle this is in any case a catastrophic outcome for insurers. The causation finding will have very significant implications for business interruption policies and many other policies. Had it not been for remote work, we probably would have heard the collective moaning of insurers when the Supreme Court delivered its verdict, & # 39; & # 39; said Mark Pring, partner at Reed Smith, a UK law firm.

Lord Hamblen, who delivered the judgment to the Supreme Court this morning, reminded us that up to 370,000 policyholders could potentially be affected by this judgment. The main headline is that the appeals of the FCA and Hiscox Action Group were substantially allowed and that the insurers' appeals were largely dismissed, ”Pring added.

“The FCA has certainly made life easier by throwing itself behind the relevant policyholders and ensuring that they don't have to engage in individual battles with insurers, but it is still the job of companies to demonstrate that the losses incurred are caused (broadly and subject to policy language) by the pandemic. This is not an easy task, even though the FCA and the Supreme Court have tried to ease the burden of proof, ”he said.

Prior to Judgment, insurers were warned not to damage the industry's reputation by continuing to contest claims supported by any evidence of financial loss due to complex technicalities. The message to insurers is very clear now, return to your office and prepare for payout if any evidence of loss can be provided. "

London & International Insurance Brokers' Association (LIIBA)

“That this decision provides final clarity on the issue of business interruption is to be welcomed. The FCA should be congratulated on the speed with which the test case process has allowed us to reach this point. But customers deserve this transparency at the point of purchase – not after a legal battle, ”emphasizes Christopher Croft, CEO of the London & International Insurance Brokers' Association (LIIBA).

“The industry's reputation has been damaged by the discussion of what is and is not insured, and we need to think hard about how to rectify that and bring absolute clarity to the product our customers buy. Everyone in the insurance value chain must ensure that customers understand exactly what they are getting, in language they recognize and presented in a way that makes sense to them, ”continued Croft.

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