Update on the business interruption claims due to COVID-19

Many business owners across the UK were shocked to find out their business interruption insurance wouldn't cover claims related to COVID-19. Across the insurance industry, there has been confusion and uncertainty regarding whether or not these policies should pay out on coronavirus claims. In essence, the big question was whether or not ‘disease’ and ‘prevention of access’ clauses would cover coronavirus-related loss claims.

Some business interruption insurance policies only cover physical damage, for instance a shop being closed due to a fire or flood. The confusion is over non-damage claims.

To help resolve these questions, the FCA (on behalf of policyholders) sought clarification from the High Court. As part of this, policy wording from 21 business interruption policies from 8 insurers was studied as a test case. Here are the insurers that agreed to be parties to the test case:

The judgment from September 2020 stated that most of the 'disease' clauses and some of the 'prevention of access' clauses provide cover.

On 15 January 2021, the Supreme Court handed down its final judgment on common clauses in these policies as well as whether or not coronavirus could be an effective ‘cause’ of losses. The FCA's legal team Herbert Smith Freehills has written a summary of the complex 112-page Supreme Court judgment, which you can review here. This is the best in-depth, plain English description that we've seen, so it's worth a read.

Not all policies have the same wording, so to help policyholders and insurers understand how their policies would be considered, the judgment also provides authoritative guidance for interpreting similar business interruption policy wordings and claims. You can read sample policy wordings here to get a sense of what language is in the policies that were in the test case.

List of policies affected

Here is a list of policies that could, in principle, be affected. If your policy is in this list it does not mean you would automatically be covered, as each policy wording and the claim circumstances are considered on a case-by-case basis. And vice versa—if your policy is not in this list, it's possible you should be covered.

The list is imperfect in part because some insurers interpreted language differently, for instance regarding whether or not a policyholder needs to prove the presence of Covid-19 at the premises in order to make a valid claim. In those cases a policy might not have been listed by an insurer.