Courts set to rule on small firms’ payout

HUNDREDS of thousands of small companies are set to find out if insurers can continue fighting to deny them vital Covid-19 payouts on their business interruption policies.

The Supreme Court is expected to rule this week on whether it will hear an appeal from seven insurers against the High Court’s verdict in September that they should pay claims filed by small businesses for losses caused by coronavirus.

The insurers – Arch, Argenta,

Hiscox, MS Amlin, QBE, RSA and Zurich – argue the policies were never meant to cover a nationwide pandemic. The test case was brought by the Financial Conduct Authority, which wants all valid claims to be paid as quickly as possible.

If the Supreme Court rules against the insurers, they will have to honour the policies.

Many small businesses are relying on payouts to help keep them afloat. Mishcon de Reya partner Sonia Campbell, who represents the Hospitality Insurance Action Group against the insurers in the test case, said that the situation facing many businesses is dire and that without the money, there is the “real prospect” that many will fail.

She added that she fears even if insurers lose the case, they will continue to fight individual claims and use other tactics to reduce their losses.

“The thing that concerns me is that insurers do not easily pay out and I’m not certain they will do that without first raising their defences,” she said.

The FCA estimates that 370,000 policyholders, 700 different types of policies and 60 insurers could be affected by the outcome of the test case.

In court papers, the regulator estimated that the value of 8,500 claims was worth around £1.2billion.