Business Interruption debate rages on

The bid for clarity in cases of business interruption shows no signs of abating, almost two years after the Supreme Court intervened on the side of UK businesses.

Many vital factors are still awaiting the court’s interpretation in order to establish a clear precedent that could benefit all businesses who wish to claim on their insurance policies.

In a January 2021 test case, the Supreme Court ruled that many insurers had been wrong to refuse compensation claims by thousands of businesses affected by the COVID-19 pandemic.
With more than £1billion paid out so far, the ruling unfortunately did not cover all policy wordings, which meant several insurers considered that they had a case to dispute their responsibility to make pay-outs.

This month, national bakery chain Greggs won a landmark battle over its £150million insurance claim.

In court, Mr Justice Butcher agreed that there was more than a single instance of business interruption, agreeing with the argument posed by Greggs’ lawyers that there were multiple restrictions imposed by ministers.

The ruling indicates a wider precedent for businesses that fall into the same category and whose policies contain potentially similar policy wording brackets as Greggs.

The case of Greggs plc v Zurich Insurance plc will now proceed to a second phase, where insurers and Greggs will hope to come to an agreement on the value of the business interruption losses recoverable.

The judgement, which favoured businesses, also ran with the Stonegate v Zurich, MS Amlin and Liberty Mutual for £1.1bn in a similar case, though Mr Justice Butcher ruled in favour of insurers on certain issues. Pub chain Stonegate has already announced the decision to appeal some elements of the judgement.

Commenting on the outcome, which saw insurers win the battle to deduct COVID furlough support from pay-outs, MS Amlin said the judgement saw the court ‘fundamentally’ support insurers’ positions.

While the judgement brings a degree of clarity to more complex business interruption cases, the appeal from Stonegate paves the way for further arguments to be made by businesses as the debate continues into 2023.

Despite the mixed reaction to the court judgements, the overall impact for other business interruption cases is a positive one for business owners.

While furlough payments could be classed as an income and therefore deducted from final pay-outs, the Greggs v Zurich ruling may mean that other businesses can claim for multiple incidents throughout the pandemic – depending on the indemnity periods specified in their policies.

With this in place as a set precedent, policy caps could potentially be renewed for each trigger period.

There is still a long way to go for policyholders and their chances of successful claims depends heavily on their insurers’ wording, but this is the breakthrough case that many need.

For BI clients at Barings Law, we are hopeful that this means many claims can now be strengthened, not only by seeing success rate predictions rise, but also through securing more compensation than was originally thought.

If your small-to-medium enterprise (SME) has run into a dispute with your insurer over your business interruption claim, contact a member of our team for a free, no-obligation consultation.

Call 0161 200 9960 or click the bottom-right icon to start a webchat.