Big news from the supreme court this week means that many SMEs who has been left to deal with the fallout from the coronavirus pandemic on their own have now been thrown a lifeline.
The court has ruled that, in many cases, small firms that had taken out business interruption insurance policies should receive a pay-out from their insurance company to cover the impact of the first national lockdown back in March 2020. The ruling is expected to affect hundreds of thousands of businesses, and will cost the insurance sector hundreds of millions of pounds.
When national restrictions meant that many businesses had to close their doors and stop operating, the companies expected to be able to claim on their insurance policies for loss of earnings. However, in many cases the insurers disputed the claims, stating that the widespread restrictions of a pandemic weren’t covered by their policies.
The new ruling doesn’t state that there will need to be pay-outs in every case. Instead, the wording of each policy will need to be carefully reviewed to determine whether it can be reasonably understood to cover loss of income from the pandemic. There will also be an opportunity for insurance companies to overturn the decision.
Broadly, though, it’s being seen as a very good thing for SMEs, who are now one step closer to clawing back some of their losses. Interim chief executive of the FCA Christopher Woolard commented on the decision:
“We are pleased that the court has substantially found in favour of the arguments we presented on the majority of the key issues.”
“Today’s judgement is a significant step in resolving the uncertainty being faced by policyholders.”
“Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat.”
What should you do if you’re a policyholder?
If you have an insurance policy that’s affected by this ruling then you’ll be understandably impatient to get your claim in motion. But at the moment it’s a case of sitting and waiting for a little longer, as insurers now start the business of going through individual policies and considering how this decision affects them.
All policyholders should hear directly from their insurer over the coming weeks, but it may be some time before you see any of the money – and remember, not every business will be covered. The Association of British Insurers have made assurances that all valid claims will be settled as quickly as possible, so at this stage it’s best to wait for somebody to be in contact. If you don’t hear after a couple of weeks then you may want to get in touch with your insurance company directly to find out the status of your claim.
Other options for financial support
The government have started up a range of different support schemes to help businesses navigate the difficulties of the pandemic, so if you’re unable to make an insurance claim there may be other options for financial support. Click here to see the different schemes that are available and check whether you may be eligible for a loan or grant.