HUNDREDS of thousands of small business owners are in line to receive a coronavirus insurance payout.

Insurers must pay as much as £1.2bn to cover losses from the pandemic after a landmark ruling by the Supreme Court today.

The Supreme Court ruled on the legal case today

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The Supreme Court ruled on the legal case todayCredit: Reuters

The Supreme Court has “substantially allowed” an appeal brought by the Financial Conduct Authority in a landmark £1.2 billion legal battle over businesses’ ability to claim on insurance for coronavirus-related disruption.

The Financial Conduct Authority (FCA) last year brought a test case, which could affect around 370,000 businesses, over the wording of business interruption insurance policies, which some insurers argued did not cover the Covid-19 pandemic.

The City watchdog previously said it was bringing the legal action following “widespread concern” over “the lack of clarity and certainty” for businesses seeking to cover substantial losses incurred by the pandemic and subsequent national lockdown.

In September, the High Court ruled on several “lead” insurance policies issued by eight separate insurers largely in favour of the FCA, which welcomed the judgment as “a significant step in resolving the uncertainty being faced by policyholders”.

The regulator, however, argued the judgment “paved the way for many insurance policies to pay indemnities on Covid-19 business interruption claims”, but also “took something away with one hand after giving more substantially and in detail with the other”.

Six of the insurers – Arch, Argenta, Hiscox, MS Amlin, QBE and RSA – also appealed against aspects of the High Court’s ruling, as did the Hiscox Action Group, which represents around 400 businesses insured by Hiscox.

In November, the UK’s highest court heard “leapfrog” appeals – which have bypassed the Court of Appeal – in a case which could have implications for hundreds of thousands of businesses affected by coronavirus.

Announcing the Supreme Court’s ruling on Friday, Lord Hamblen said: “The appeals of the Financial Conduct Authority and the Hiscox Action Group are substantially allowed and the insurers’ appeals are dismissed.”

Richard Leedham, a partner at law firm Mishcon de Reya who represented the Hiscox Action Group (HAG), 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.”

Mr Leedham – who acted for HAG, which represents around 400 businesses insured by Hiscox – added: “Today’s outcome is one of the most significant for business in modern times.

“The result should leave Hiscox and the rest of the insurance industry in no doubt that they should immediately start doing the right thing and settle these claims.”

Explaining the background to the landmark case, Lord Hamblen said: “The appeal concerns the proper construction of 21 sample insurance policy wordings.

“It is estimated that, in addition to the particular policies chosen for the test case, some 700 types of policies across over 60 different insurers and 370,000 policyholders could potentially be affected by the outcome of this litigation.”

Summarising the Supreme Court’s decision in relation to “prevention of access clauses” – which are triggered by “public authority intervention preventing access to, or use of, the business premises” – Lord Hamblen said the High Court’s interpretation was “too narrow”.

The judge said: “An instruction given by a public authority may amount to a ‘restriction imposed’ if it carries the imminent threat of legal compulsion or is in mandatory and clear terms and indicates that compliance is required without recourse to legal powers.”

Sheldon Mills, executive director of consumers and competition at the FCA, said in a statement after the ruling: “Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat.

“This test case involved complex legal issues. Our aim throughout this test case has been to get clarity for as wide a range of parties as possible, as quickly as possible, and today’s judgment decisively removes many of the roadblocks to claims by policyholders.

“We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible.
“Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.

“As we have recognised from the start of this case, tens of thousands of small firms and potentially hundreds of thousands of jobs are relying on this.

“We are grateful to the Supreme Court for delivering the judgment quickly. The speed with which it was reached reflects well on all parties.”

This post first appeared on thesun.co.uk

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