Update – Covid-19 and Business Interruption Insurance

Further to my blog post back in September, the Supreme Court has handed down judgment relating to certain business insurance policies. In this ‘leap frog’ appeal to Supreme Court, the Supreme Court was asked to consider the meaning and effect of infection/notifiable disease clauses, prevention of access clauses, hybrid (of disease and prevent of access clauses) clauses and ‘trends’ clauses (which adjust the recoverable loss based upon trends in the market which would have affected the insured business).

The High Court had decided that of the sample of 21 policy wordings considered, 12 provided business interruption cover for losses suffered due to the pandemic and the government response.

It is a long and detailed judgment (running to 112 pages), however, in short, the result of the judgment is that additional policy types were held to provide cover, that cover may be available for partial closure of premises and that claims should not be reduced under ‘trends clauses’ because they apply to losses that are wholly unrelated to the insured peril (here, Covid-19) so ‘trends clauses’ cannot be used to reduce a claim because the loss would have resulted in any event from the pandemic.

The FCA has advised that the Supreme Court judgment will be distilled into a series of declarations which the Court will issue in due course.

The wording of individual policies will still need to each be assessed against the Supreme Court judgment and eligible policyholders should be contacted by their insurers in due course. The FCA has produced a policy checker and FAQs for individual businesses to assess their policies.

For a more in depth discussion on the Supreme Court’s judgment, my colleague Stuart Pemble, has written an article in the Estates Gazette.

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