LONDON – One day last March, when the coronavirus pandemic was starting to spread across Northern Ireland and the rest of Britain, Daniel Duckett was forced to close the doors of his bakery and cafe in Belfast, the Lazy Claire Patisserie . Britain’s prime minister would order all restaurants closed as soon as the scale of the pandemic becomes clear.
Lazy Claire Patisserie, a few months before its two-year anniversary, would not reopen its doors for more than three months. “We followed the advice; we believe it was the right thing to do and that was what was foreseen, ”said Duckett.
There was a consolation: Mr. Duckett had purchased business interruption insurance, which covers loss of profits when unexpected events outside the store’s control force it to close. The day they locked the doors, he filed a lawsuit against Hiscox, a major insurance company in Britain.
“It has been a battle ever since,” he said.
Several weeks and countless phone calls later, his claim, which would cover up to £ 100,000 (or $ 136,000) in losses, was denied. Duckett said that Hiscox told him that the pandemic was not something the company had envisaged being covered by its policies.
He soon discovered that he was not alone and became one of the founding members of the Hiscox Action Group, which brought together about 750 companies to take action against the insurer.
On Friday, Duckett received good news after the delay in payment of insurance forced him to take on a new debt a few months before paying off his loans: The country’s highest court unanimously rejected insurers’ calls, paving the way for him and hundreds of thousands of other small business owners in Britain to receive insurance payments for pandemic business interruption requests.
The Financial Conduct Authority, Britain’s financial services regulator, took the legal test case on behalf of policyholders to the country’s highest courts to try to resolve the issue quickly.
The Supreme Court decision, which is legally binding on eight insurers involved in the case, is expected to affect 370,000 companies with 700 types of policies issued by 60 insurers.
The decision has profound implications for small businesses that have been forced to repeatedly close or shut down large parts of their operations under government orders to contain the virus. The pandemic has put small businesses and their employees in danger, with a quarter of companies saying they cut staff in the last months of 2020.
At issue in the case were two terms that appeared in many of the policies: “disease clauses”, which cover losses due to any occurrence of a disease that must be reported to the authorities, and “access prevention clauses”, which cover losses when public authorities block access to company facilities. Insurers argued that the pandemic did not meet the terms of any of these clauses. But the court’s appeals found that the pandemic and the government’s instructions to stay home and close deals were covered by the terms of the insurance policy.
“Today’s trial is a huge victory,” said Mike Cherry, president of the Federation of Small Businesses. “It has been a long and difficult path to reach this stage, so it will bring clarity and hope to the thousands of companies that have been in financial limbo for almost a year.”
Hiscox said that because of the decision and additional government restrictions in Britain, it expects to pay $ 48 million more in business interruption orders in 2020.
The Supreme Court also ruled that companies could make claims for partial closing of their businesses, and for closing orders that were not legally binding – in many cases, for example, the government has repeatedly asked companies to close days before placing the order. politics in law. The Financial Conduct Authority said this meant that more companies would have valid claims and some payments would be higher.
Sheldon Mills, the financial services regulator’s executive director of consumers and competition, said the regulator was working with insurers to make payments as soon as possible and to have interim payments whenever possible.
“As we recognized from the beginning of this case, tens of thousands of small businesses and potentially hundreds of thousands of jobs depend on it,” said Mills.
The Supreme Court decision is also expected to have broader implications for the insurance industry. Judges said that a 2010 business interruption case decided in a British court, because of complaints filed by a hotel owner in New Orleans that was damaged by a hurricane, was wrongly decided in favor of the insurer, the British branch of an Italian company. The case, which has been widely cited in the past, must be dismissed, the judges said. Insurers can now face more successful claims for other types of damage, such as floods or storms.
Hiscox Action Group’s work is not over yet, Duckett said, as some policies were not covered by Friday’s decision and some companies are still going through their own arbitration processes with insurers.