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Supreme Court backs small businesses over Covid-19 insurance claims

The UK Supreme Court has ruled in favour of small firms following a legal battle over business interruption insurance claims, meaning hundreds of bars could soon receive payments to help them through the Covid-19 pandemic.

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The Supreme Court’s decision has been hailed a “landmark victory”

Watchdog the Financial Conduct Authority (FCA) brought the test case to the Supreme Court, with eight insurers agreeing to take part in the proceeding. The appeal aimed to clarify whether a number of insurance policy wordings cover business interruption losses due to the Covid-19 pandemic and public health measures taken by UK authorities in response to the pandemic from March 2020.

The Supreme Court considered 21 sample insurance policy wordings. It ruled in favour of the FCA’s appeal and dismissed the insurers’ appeals.

In April last year, more than 100 bars, pubs and clubs planned to take coordinated legal action against insurer Hiscox for not paying business interruption insurance claims.

Richard Leedham, who represented the Hiscox Action Group on behalf of small businesses, said: “This is a landmark victory for a small group of businesses who took on a huge insurance player and have been fully vindicated.

“What is important now is that Hiscox accepts the Supreme Court’s verdict and starts paying out to its policy holders, many of whom are in danger of going under.”

Business survival

Trade body UK Hospitality said “at first glance” the decision looked like “very positive news”, but cautioned the association still needed to “pore over the details”.

Kate Nicholls, chief executive of UK Hospitality, added: “Businesses took out policies in good faith and it is right that insurers stick to these agreements and honour claims.

“Should this result in pay-outs to policy holders – a point which is still not clear at present – this could provide an additional lifeline that many businesses desperately need. It could be the difference between keeping staff members on or being forced to let them go; it could mean the survival of a business that was previously staring collapse in the face.

“I would like to thank Taylor Wessing for all their hard work. We have been pushing for a positive resolution, and the legal insight that Taylor Wessing has provided to hospitality operators has been immense. Hopefully this outcome will give many small businesses in the hospitality sector peace of mind and possibly some financial support they need to begin rebuilding.”

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