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LONDON – One day in March, as the coronavirus pandemic began to sweep across Northern Ireland and the rest of Britain, Daniel Duckett was forced to close the doors of his Belfast bakery and cafe, The Lazy Claire Patisserie. The British Prime Minister would order all restaurants to close as the scale of the pandemic becomes clear.
Lazy Claire Patisserie, a few months away from its two-year anniversary, would not reopen for more than three months. “We took the advice; we thought it was the right thing to do and that was what was mandated, ”said Duckett.
There was one consolation: Mr. Duckett had purchased business interruption insurance, which covers loss of income when unforeseen events beyond the store’s control force him to close. The day they locked the doors, he filed a claim with Hiscox, a major insurance provider in Britain.
“It’s been a battle ever since,” he said.
Several weeks and countless phone calls later, his claim, which would have covered up to £ 100,000 (or $ 136,000) in losses, was dismissed. Mr Duckett said Hiscox told him the pandemic was not something the company considered to be covered by their policies.
He soon discovered he was not alone and became one of the founding members of Hiscox Action Group, which united up to 750 companies to take action against the insurance company.
Mr Duckett got good news on Friday after the delay in securing an insurance payment forced him to take on new debt within months of paying off his loans: the country’s highest court has unanimously rejected the insurers’ appeals, paving the way for it. and hundreds of thousands of other small business owners in Britain to receive insurance payments for pandemic business interruption compensation claims.
The Financial Conduct Authority, the UK’s financial services regulator, has taken the legal test case on behalf of policyholders to the highest courts in the country in an attempt to quickly resolve the issue.
The Supreme Court ruling, which is legally binding on eight insurers involved in the case, is expected to affect 370,000 companies with 700 types of policies issued by 60 insurers.
The move has far-reaching implications for small businesses that have been repeatedly forced to shut down or shut down huge parts of their operations under government orders to contain the virus. The pandemic has put small businesses and their employees at risk, with a quarter of companies reporting downsizing in the last months of 2020.
At issue in this case, two terms appeared in many policies: “sickness clauses”, which cover losses resulting from any occurrence of an illness which must be reported to the authorities, and “access prevention clauses”, which cover losses when they are public authorities block access to commercial premises. Insurance companies have argued that the pandemic did not meet the terms of either of those clauses. But court appeals found the pandemic and the government’s instructions to stay home and shut down businesses were covered by the terms of the insurance policy.
“Today’s judgment is a great victory,” said Mike Cherry, president of the Federation of Small Businesses. “It has been a long and difficult road to get to this point, which will bring clarity and hope to the thousands of businesses that have been left in financial limbo for almost a year.”
Hiscox said that due to the ruling and further government lockdowns in Britain, he expected to pay an additional $ 48 million in business interruption claims in 2020.
The Supreme Court also ruled that companies can make claims for the partial shutdown of their business and for shutdown orders that were not legally binding – in many cases, for example, the government has repeatedly asked businesses to shut down days before putting the policy into effect. law. The Financial Conduct Authority said that meant more companies would have valid claims and some payouts would be higher.
Sheldon Mills, executive director of consumers and competition at the financial services regulator, said the regulator is working with insurers to ensure payments are made as quickly as possible and interim payments are made whenever possible.
“As we have recognized from the start of this business, tens of thousands of small businesses and potentially hundreds of thousands of jobs depend on this,” Mills said.
The Supreme Court’s decision is also expected to have broader implications for the insurance industry. Judges said a 2010 disruption of operations case tried in a UK court, following claims filed by the owner of a New Orleans hotel that had been damaged by a hurricane, has been resolved in favor of the insurer, the UK branch of an Italian company. The case, which has been widely cited in the past, should be dismissed, the judges said. Insurers could now face more successful claims for other types of damage, such as floods or storms.
The work of the Hiscox Action Group is not yet complete, Mr Duckett said, as some policies are not covered by Friday’s ruling and some companies are still going through their own arbitration processes with insurance companies.
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