The Financial Conduct Authority (FCA) has recently filed and won their Business Interruption Test Case with the High Court due to many insurers refusing to offer pay outs to businesses amid the COVID-19 pandemic.
Due to the current pandemic, many smaller businesses have suffered immense financial losses since being made to close by government order. As a result, many of these firms have filed claims under business interruption (BI) policies – i.e. insurance policies that cover businesses that endure a loss of income from not being able to carry out “business as usual” or from “unexpected events”. However, many insurers have refused to pay-out as they feel that the BI policies “were not designed to cover a government-imposed lockdown.”
Consequently, the FCA has filed a ‘test case’ with the High Court so that both insurers and businesses were clear on BI policies. They won this case on 15th September, meaning that roughly 370,000 firms could be given up to £1.2bn. Despite this, the Court stated that not all BI policies would result in a pay-out.
With this being the first time the FCA has been involved in such a case, it is likely further changes are afoot. Not only does the result of this case mean that smaller businesses will have a higher chance of survival given this difficult economic time, many policies and possibly even laws are likely to be further examined. This ‘test case’ appears to be a lesson both in ensuring an agreement is understood in the same way by both parties and following through.
During the case, when 56 insurers were asked for further information proving they were not liable to pay-out, an unknown number of them they suddenly agreed to pay the relevant businesses. So, why were insurers not following through on their own policies, and why did it take going to the High Court for businesses to be fairly compensated? I believe this presents a far bigger issue in the current business world – the fact that money generally seems to trump ethics for many.
In my opinion, had it not been for the High Court, the insurers involved in this case would have likely not paid businesses at all. In fact, let this be a lesson to everyone. We must educate ourselves on our rights so that we are not swindled or taken advantage of. With legal jargon being so complicated, it’s easy for the legally unaware to become confused. Whilst a good legal team can be great to help make sense of the legal world, smaller businesses and those of us who cannot afford such expensive guidance/representation must ensure that we are well-informed and consistently up to date with what’s going on in the world. Why struggle for the answers when they could be right at our fingertips?
If we continue to keep ourselves legally informed, both personally and businesswise, we will surely face less hassle in the long term. If we continue learning and growing, we will ultimately set ourselves up for success and continue to strive for what we know we deserve.
