Cheers broke out in small businesses across the UK today as the Supreme Court backed them in a dispute with insurers over disputed coronavirus business interruption claims potentially worth £1.2bn. The Axbridge Chamber of Commerce’s secretary Harry Mottram said common sense had prevailed.

He said: “Nobody takes out insurance that is worthless – so of course the insurers should pay firms who claim on their business interruption policy on losses caused by the first national COVID-19 lockdown with the clause on illness preventing trade.”

Good news

Sky News reported: “Judges were asked to set the parameters for valid claims from various policies following a test case brought by the Financial Conduct Authority (FCA) with the support of eight insurance companies last summer. The High Court judgment, handed down in September, was widely seen as supportive for the bulk of the estimated 370,000 companies said to be affected by the dispute.

“A broad range of firms including pubs, cafes, wedding planners and beauty parlours argued they faced ruin when they were turned down by insurers for business interruption policy claims on losses caused by the first national COVID-19 lockdown. Reasons for turning down payouts by insurers included that policies demanded there be local cases in any outbreak situation.

“The legal process was fast-tracked to the highest court in England and Wales which said on Friday that it was to had “substantially allowed” the appeal brought by the FCA and an action group to clarify the position.”

Axbridge Chamber of Commerce member Ian Carrotte of ICSM Credit said it was a massive relief as without the insurers paying up many SMEs would have gone bust. He said: “The idea that you take out insurance in good faith but the insurer has no intention to pay any claim is ridiculous. This is a victory for common sense.”

The BBC reported on London hair salon The Drawing Room that pays £1,200 a year for business interruption insurance but has been denied so far meaning paying the annual premium is effectively a waste of money.

Kevin Peachey reported: “Small businesses are eagerly awaiting a Supreme Court ruling on insurance payouts for those forced to close during the first national lockdown. Many claimed on business interruption insurance policies, but insurers refused arguing there was no cover for such unprecedented restrictions. It was agreed that a selection of policy wordings be tested in court. The case has implications for 370,000 small businesses, and involved potential payouts of £1.2bn. Judges at the Supreme Court will set the parameters of whether or not valid claims can be made under these policies. The High Court earlier found mostly in favour of insurers having to pay out to policyholders, in what was regarded by many commentators as a surprise defeat for the insurance sector.”

James Ollerenshaw

Legal precedent

Today’s ruling is the final judgement in the case, and will be have implications for all disputed business interruption insurance cases as it will set a legal precedent.

James Ollerenshaw’s hair salon was one of those businesses unable to operate during the first national lockdown.

The Drawing Room in London’s Spitalfields is owned by James Ollerenshaw who paid an annual premium of £1,200 for business interruption insurance, and importantly disease cover came as part of it. His insurers insisted that the pandemic was not included in the cover. He said if the insurers are forced to pay it would help to cover some costs such as rent but the business would still be in debt due to the shut downs.

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For details for the work of the journalist Harry Mottram visit