Rob Atkinson: "Insurance companies now need to do the right thing"

Policyholders hoping to claim business interruption insurance chalked up a 'resounding victory' at The High Court​​​ after it ruled that the majority of businesses forced to close in March due to the Coronavirus lockdown are entitled to be compensated. 

"This is a landmark case. Unfortunately landmark cases tend to go to appeal because so much is at stake," says Black & White Hospitality's in-house lawyer Rob Atkinson, who raised over £30,000 from hospitality businesses to fund possible group legal action. ​​​

"However, you would hope that in these circumstances the insurance industry will do the right thing and don't go down that route," Atkinson continues.

"The ruling justifies our campaign and what many others in hospitality have been doing. We've been one of the more vocal sectors in terms of speaking out about this injustice." 

The Financial Conduct Authority's (FCA) case was designed to test a sample of 21 policy wordings that it previously said captured ‘the majority of the key issues that could be in dispute’, the judgement ruled that most, but not all, of the disease clauses provide cover.

 It also says that certain denial of access clauses in the sample provide cover, but this depends on the detailed wording of the clause and how the business was affected by the Government response to the pandemic, including for example whether the business was subject to a mandatory closure order and whether the business was ordered to close completely.

The test case has also clarified that the Covid-19 pandemic and the Government and public response were a single cause of the covered loss, which, the FCA says, is a key requirement for claims to be paid even if the policy provides cover. 

"We now need to pick the bones out the judgements and see what the exact impact it has on individual policy holders. But the overall conclusion at this point is that it's really good news for us all." 

"The insurance companies created a lot of fog about this issue. But when you read the actual policies they were very clear: many of them basically said, if you can't trade, we'll cover you." 

Atkinson says that if insurers don't appeal things previously disputed claims could be settled very quickly. "Assuming insurance companies do the right thing I'd expect them to be in touch with policyholders to discuss the quantum (amount) of the claim within the next week," says Atkinson.

Given the urgency situation, any appeal from the insurance industry is likely to again be fast-tracked by the FCA but will still add month of delay. 

"Every day of delay is bad. Hospitality businesses desperately need that cash. Insurers now need to pay out."

Trade body UKHospitality - which backed Atkinson's campaign - has also welcomed the ruling but says it is disappointed that the court took a more conservative view on the prevention of access/competent authority cover, which is commonly taken out by hospitality businesses.

The court found cover in some wordings but, in general, losses claimed under this clause will require a detailed review of the policy wording against the judicial guidance to establish precisely where cover applies. 

On the key question of causation, the court determined that the pandemic and Government’s response to it were a single cause of the covered loss for the purposes of establishing the quantum (value) of claims. This will be significant when determining pay outs under the relevant policies. 

“The confusion around business interruption insurance policies came at the worst possible time for businesses. They found themselves being denied support they thought they were entitled to in the middle of the worst crisis they have known," says UKHospitality chief executive Kate Nicholls. 

“We are very pleased that this ruling, generally speaking, finds in favour of businesses who had taken out policies in good faith and may now have cover following the court’s guidance. Our sector is still on a knife-edge and needs all the support it can get.”