Wait until next year before any business interruption insurance payouts
Small businesses will have to wait until next year before they see a penny of Covid business interruption insurance payouts.
This is despite a High Court ruling last month, siding with small businesses on many points when it came to whether insurers should honour business interruption insurance which specifically covered pandemics.
The High Court ruled on 21 sample insurance contracts in a test case designed to clear up disputes over whether insurers should pay up.
The eight insurers involved in the High Court ruling have said not to pressure from the financial regulator to settle insurance payouts following the court ruling.
Instead, they will appeal where the High Court sided with watchdog the Financial Conduct Authority (FCA) over wordings in the policies.
Up to 370,000 businesses will be affected by the outcome.
The FCA said: “We had hoped to reach an agreement with the insurers by today [Wednesday] on the interpretation of some important elements of the judgment affecting which small businesses get paid and how much. This would have allowed for faster pay-out for policyholders with eligible claims.”
The nub of the issue is that even when small businesses took out additional insurance specifically against pandemics, insurers argue that Covid-19 was excluded because at the time it wasn’t officially recognised as a disease.
For many businesses banking on an insurance payout, next year will be too late.
Richard Leedham of law firm Mishcon de Reya, who represents a group of policyholders who brought a £52m action against insurer Hiscox, told the Telegraph: “Businesses and jobs are being lost for every day that insurers delay paying their policyholders.
“The insurers seem content for the process to continue for as long as possible. We believe that the court’s ruling was clear, and insurers should begin their payments immediately.”
In turn, the FCA will lodge is own petition at the High Court tomorrow, asking to “leapfrog” all the way to the Supreme Court to settle the matter.