Supreme Court insurance ruling could be a lifeline for tourism & hospitality businesses - PKF Francis Clark
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Supreme Court insurance ruling could be a lifeline for tourism & hospitality businesses

On the face of it, the Supreme Court’s ruling in the Financial Conduct Authority’s business interruption insurance test case is potentially excellent news for businesses which have been adversely impacted by lockdowns.

At the start of the pandemic, many tourism, hospitality and retail businesses were initially optimistic that their insurance would cover them for loss of trade when they were ordered to close by the government. However, it soon became clear that most would be left disappointed unless they had specialist policies.

This judgment could be a lifeline for thousands of businesses which have lost months of trade due to Covid-19. Overall, it is expected to cost insurers hundreds of millions of pounds.

Businesses will need to review their policies in light of this case and speak to their insurance brokers to establish where they stand.

Those who are now eligible for payouts from their insurers will want to receive them as soon as possible, especially as they are currently feeling the effects of another lockdown.

How those payments are calculated will be more complicated than in typical business interruption scenarios – such as when kitchen equipment breaks down – given that businesses forced to close during lockdowns have been helped by the furlough scheme, business rates relief and other support. Again, what is covered will depend on the specific terms of individual policies.

While today’s news will certainly be a relief for many businesses, there may yet be a sting in the tail if this ruling leads to higher insurance premiums in future.


A ruling by the Supreme Court today (January 15) in a test case brought by the Financial Conduct Authority (FCA) means that thousands of policyholders will now have their claims for business interruption losses due to Covid-19 paid.

Tourism, hospitality and retail businesses have been prevented from trading by government restrictions at various times during the pandemic. But many insurers have rejected claims made by small and medium sized businesses under their business interruption policies.

The FCA brought a test case to urgently clarify key issues of contractual uncertainty for policyholders and insurers, using a representative sample of 21 types of policy issued by eight insurers.

The judgment could affect 370,000 small businesses with 700 types of policies issued by 60 insurers.

Sheldon Mills, Executive Director, Consumers and Competition at the FCA, said: “Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. 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.”

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Tom is a partner in the Truro office of PKF Francis Clark with expertise in the tourism and leisure industries. Tom’s leisure sector clients are… read more
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