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The High Court has handed down its judgment in the Financial Conduct Authority’s (FCA) business interruption insurance test case, and small businesses have celebrated it as a partial victory, arguing that it still leaves many with little certainty around whether they will receive pay-outs for policies that have cost them thousands.
The test case was brought in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims and the wider market.
Many policyholders whose businesses were affected by the COVID-19 pandemic suffered significant losses, resulting in large numbers of claims under business interruption (BI) policies.
The Court found in favour of the arguments advanced for policyholders by the FCA on the majority of the key issues, with the authority calling the ruling a significant step in resolving the uncertainty being faced by policyholders.
"We are grateful to the court for delivering the judgment quickly and the speed with which it was reached reflects well on all parties," said Christopher Woolard, interim chief executive of the FCA.
"Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible, and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful."
Responding to the news, Federation of Small Businesses (FSB) national chairman Mike Cherry said the ruling marks a big step forward.
"It can only be celebrated as a partial victory, however, as it still leaves many with little certainty around whether they will receive pay-outs for policies that have cost them thousands. And for many others with standard interruption cover, this judgement will have no bearing," said Mr Cherry.
“The FCA was absolutely right to argue that disease or denial of access clauses within interruption policies should trigger pay-outs in the event of coronavirus-linked disruption. We’re hugely grateful for its work in this space."
He echoed the regulator’s call to insurers to reflect on the clarity provided by this judgement and do the right thing by policyholders, many of which are fearing for their futures after six months of serious disruption.
"They acted responsibly by taking out these policies, and having them honoured is crucial to encouraging more firms to do the right thing where insurance is concerned," said Mr Cherry.
"With the job retention scheme winding down, policymakers need to look very closely at what policy measures should follow it to ensure jobs are protected at ultimately viable businesses – a targeted successor scheme may well be needed."