The Supreme Court has today (January 15) backed small firms over business interruption insurance policies, forcing insurers to pay out on disputed COVID-19 business interruption claims.

The Financial Conduct Authority (FCA) brought a case against a total of eight insurers in June 2020 to clarify whether 21 policy wordings, affecting potentially 700 types of policies, 60 insurers, 370,000 policyholders and billions in insurance claims, covered disruption and Government-ordered closures to curb the virus.

Originally, many insurers refused to pay businesses, arguing that only a handful of policies covered the unprecedented circumstances. It was agreed that a selection of policy wordings would be tested in court. The test case lasted months, and in September, the High Court ruled in favour of businesses. Despite appeals from insurers, which fought against the court’s ruling in favour of policyholders, the Supreme Court has now backed small businesses and they can expect insurance payouts.

In a joint statement, the Night Time Industries Association (NTIA) and NDML, a specialist insurance broker, said: “We are pleased that the Supreme Court has provided a positive assessment of a number of insurance policies that will affect our clients. However, we also know that the devil is in the detail and therefore we are currently engaged in a meticulous reading of this judgment in order to ensure that we provide as many clients as possible with the maximum available coverage in light of the Supreme Court’s directions.”

Huw Evans, director general of the Association of British Insurers, said: “Insurers have supported this fast-track legal process every step of the way and we welcome the clarity that the judgment will bring to a number of complex issues.

“The insurance industry expects to pay out over £1.8bn in COVID-19 related claims across a range of products, including business interruption policies. Customers who have made claims that are affected by the test case will be contacted by their insurer to discuss what the judgment means for their claim. All valid claims will be settled as soon as possible and in many cases the process of settling claims has begun. Some payments have already been made where valid business interruption claims have not been impacted by the test case ruling.

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