Yesterday, 15 September, the High Court gave its judgement on a legal test case examining whether certain business interruption insurance policies did, or did not, cover Coronavirus claims.

The court case arose because, when the pandemic hit, about 10% of business insurance policies were found to have ambiguous wordings. This made it unclear whether policyholders were entitled to claim or not. The vast majority of policies quite clearly excluded cover.

With the prospect of thousands of businesses being left in limbo regarding their cover, the Financial Conduct Authority (FCA) and insurers agreed that the quickest and fairest way to resolve the question would be to take the matter to court and obtain a legal decision. The court looked at 21 policy wordings from eight insurance companies as a sample representation.

The High Court found that most, but not all, of the policies it looked at should provide cover to policyholders claiming for losses arising from Coronavirus, subject to the other normal parameters of the policies.

The insurers involved with the test case now must contact their policyholders within seven days to update them on the situation regarding their claims. The insurers have also been given a period of time to review the 160-page court report and lodge appeals in October.

Insurers that were not part of the legal test case but whose policies followed a similar wording structure are expected to also follow the legal judgement. They should also be contacting their policyholders in the coming days. Nothing changes for the vast majority of policyholders whose policies clearly stated there was no cover.

Duncan Sutcliffe, director, Sutcliffe & Co Insurance Brokers, surmised: “This test case was brought to bring clarity to those policy wordings that were ambiguous or badly written in relation to this unprecedented pandemic. It has been welcomed by the insurance industry. £billions of claims are paid every year, so it was important to remove this uncertainty regarding cover.

“Although this test case has brought us a step closer to resolving these particular claims, insurers still need to go through the process of settling each claim individually, which will inevitably take time. Even without an appeal, I expect it will be some months before most of these claims are paid.

“Looking ahead, insurers will have learnt their lesson and will make their wordings clearer to avoid a repetition of this uncertainty.”