High Court judges order insurers to pay business interruption claims

Thousands of British businesses are set for lifeline payouts after winning a landmark court victory against insurers.

Companies who were told they would not be able to claim on their insurance when lockdown hit in March were vindicated yesterday after two High Court judges ordered insurers to stump up.

But there are fears that some of the 400,000 affected businesses will still be left with no chance of a payout, as the judgment was not as wide-ranging as many were hoping.

In a sign that investors were expecting the hit for insurers to be a lot worse, shares in Hiscox jumped 17 per cent and RSA climbed 4.7 per cent.

Companies across the UK were left struggling to survive after being forced to shut.

Many restaurants, record labels, cafes and shops were quick to claim under ‘business interruption’ insurance policies they had taken out.

But around 400,000 firms were told that they would not be able to claim. Insurance giants such as Hiscox and Zurich said business interruption insurance only covered local incidents or outbreaks.

That caused outrage among small business owners, many who were left on the brink of collapse. As more companies warned they were in danger of going bust, the Financial Conduct Authority intervened.

It took eight insurers – Arch, Argenta, Ecclesiastical Insurance, Hiscox, MS Amlin, QBE, Royal & Sun Alliance and Zurich – to court, to have judges decide whether they should pay out. Though these eight were used as an example, the judgment applies to the whole industry.

Following an eight-day trial in July, Lord Justice Flaux and Mr Justice Butcher yesterday said most insurers must pay out. Analysts have predicted claims could top £3billion.

Richard Leedham, at law firm Mishcon de Reya who represented some Hiscox policyholders, said: ‘This judgment is one of the most significant in recent years and will provide a lifeline for small businesses across the country.’

But it will have left many disappointed. While policies which mention an outbreak of a disease will generally have to pay out, policies which only cover ‘prevention of access’ to business premises will not.

Tory MP Mel Stride, chairman of the Treasury Committee, said: ‘The devil will be in the detail of this judgment. 

Others may be caught up in any appeals. It’s now vital that all those who should be paid receive these payments.’

Rob Benson, head of insurance at accountant Grant Thornton, said: ‘This matter is by no means settled. 

‘Given the nuanced nature of this ruling, which neither denies coverage across the board nor orders all insurers to pay out under all of the affected policy wordings, it is unlikely that either side will be fully satisfied.’

Either side can appeal, and the case could go straight to the Supreme Court.