Insurers may be forced to pay out to firms hit by Covid

Hundreds of thousands of firms who have been affected by the Covid-91 pandemic may now be able to claim on their insurance policies.

Royal Courts of Justice © Getty Images/ iStock
The High Court heard a test case brought by the FCA
(Image credit: © Getty Images/ iStock)

The Financial Conduct Authority’s (FCA) victory over insurers in the row about whether they should pay out on business interruption policies to firms hit by Covid-19 is a rare ray of sunshine for hard-pressed small and medium-sized enterprises (SMEs). While insurers say last week’s High Court ruling does not apply across the board, they concede that they will now have to cover hundreds of millions of pounds worth of claims from SMEs.

The FCA brought the test case against eight insurers after the insurance industry argued that business interruption policies – designed to compensate businesses prevented from trading by some sort of exceptional event – had not been intended to cover pandemics such as Covid-19. The regulator asked judges to review 21 different types of policy wording to assess insurers’ liability. In most cases, the court ruled insurers should settle SMEs’ claims despite their initial refusal to do so.

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David Prosser
Business Columnist

David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.