Tens of thousands of small businesses have been handed a lifeline after Supreme Court judges ruled that insurers must pay out for coronavirus-related losses.
Many firms took out business interruption insurance policies to cover them for unexpected events that caused them to stop trading but then found that insurance companies rejected claims for losses resulting from lockdowns.
Payouts could help many small firms survive through the latest restrictions.
Richard Leedham, partner at Mishcon de Reya who represents one group of policyholders, said he hoped insurers would assess and pay out on claims quickly after the decision was handed down on Friday.
He added: “We are glad that the Supreme Court has found that the vast majority of policyholders of non-property damage business interruption (BI) cover will have cover for their business interruption losses caused by the national response of Government to Covid-19.
“The Supreme Court has recognised that, just when this cover was needed most by thousands of UK businesses, insurers were wrong to argue that coverage was applicable only if there were narrow local restrictions, that they could deny claims because the cover had not been intended to be provided and/ or because the interruption and therefore losses would have happened in any event.”
The City regulator brought a test case last year after thousands of businesses complained about being unable to claim on their insurance policies during the first lockdown.
It asked High Court judges to rule on whether the wording in a selection of common insurance policies meant that they should cover losses caused by coronavirus restrictions.
The case was fast-tracked to the Supreme Court which decided that in most cases insurers should pay out. Judges also provided guidance for a further 700 policies, potentially affecting as many as 370,000 small businesses.