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Night time industries welcome court ruling on COVID-related insurance claims

By Chris Cooke | Published on Thursday 17 September 2020

The Night Time Industries Association has welcomed a ruling in the English High Court earlier this week that clarifies to an extent the obligations of insurers to pay out to businesses that were forced to close as a result of COVID-19, which includes venues and nightclubs.

Early on in lockdown, the NTIA and others criticised a number of insurers for refusing to pay out to companies that had business interruption policies which – those companies argued – should have kicked in as soon as the government ordered high street business to close their doors in a bid to combat the spread of the coronavirus.

Responding to that criticism, the UK’s Financial Conduct Authority took eight insurers to court to basically get a judicial opinion on how various common phrases in insurance policies should be interpreted in the context of COVID-19. Of particular interest were phrases relating to business interruption caused by disease or government measures that force temporary closure.

The FCA hoped that its action would provide clarity on the various common phrases it had identified, to save each individual policyholder that had been denied a business interruption payout from having to separately fight their claim through the courts.

Responding to the high court’s ruling on this case, the interim CEO of the FCA, Christopher Woolard, explained: “We brought the test case in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims and the wider market”.

“We are pleased”, he went on, “that the court has substantially found in favour of the arguments we presented on the majority of the key issues. Today’s judgment is a significant step in resolving the uncertainty being faced by policyholders. We are grateful to the court for delivering the judgment quickly and the speed with which it was reached reflects well on all parties”.

Elsewhere, the FCA acknowledged that “although the judgment will bring welcome news for many policyholders, the judgment did not say that the eight defendant insurers are liable across all of the 21 different types of policy wording in the representative sample considered by the court. Each policy needs to be considered against the detailed judgment to work out what it means for that policy”.

It remains unclear quite how many companies still seeking payouts on COVID-related business interruption insurance policies will benefit from this week’s ruling.

As the FCA noted, not all the possible policy wording it presented to the court was deemed sufficient to obligate the insurer to payout. And not all disputes by any means centre on clauses that talk about diseases or government measures that force temporary closure. However, for some companies the clarity provided by the court should help them secure payment.

Looking at this from the perspective of venues, clubs and other night time business – many of which are still closed because of COVID rules – the CEO of NTIA, Michael Kill, said: “This verdict is just what we’ve been waiting for”.

He went on: “The night-time economy has been one of the hardest hit by lockdown measures during the pandemic, and many businesses are grassroots, family-owned venues, that are cultural cornerstones of towns and cities across the UK. The enforced lockdown since March has created unthinkable financial turmoil and stress for many business owners. This verdict gives some reassurance that these businesses will get the payments they deserve to help them survive this period”.

Meanwhile, Simon Mabb, MD of insurance broker NDML, added: “We’re so pleased that these months of hard work have paid off for our clients. This is the result we all knew was the right one from the beginning, and it’s frustrating that it’s taken so long to reach this point. But it’s reassuring to know that we can now give some certainty back to the venues and businesses that have had their lives put on hold for so long”.

The insurers could as yet appeal the judgement which would put everything on hold again. However, referencing a possible appeal in his statement, Woolard back at the FCA said: “Insurers should reflect on the clarity provided here and, irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgment says should be paid. They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps”.

“If any parties do appeal the judgment”, he went on, “we would expect that to be done in as rapid a manner as possible in line with the agreement that we made with insurers at the start of this process. As we have recognised from the start of this case, thousands of small firms and potentially hundreds of thousands of jobs are relying on this”.