Understanding the impact of the ‘At The Premises’ ruling on business interruption insurance

Many policyholders turned to their insurance policies to recover these losses. However, ambiguity around policy wordings and coverage led to widespread disputes.

In 2020, the Financial Conduct Authority (FCA) launched a test case to address this issue. Representing policyholders’ interests, the FCA sought to clarify the validity of claims under Business Interruption insurance policies. The test case highlighted that 370,000 policyholders held approximately 700 types of policies issued by 60 insurers, all of which could potentially be affected by the court’s decision.

The Supreme Court’s 2021 ruling focused on policies with “radius” wordings, which provided coverage for losses arising from disease occurrences within a specified radius of the insured premises. This ruling did not, however, address policies with ATP wordings, which cover losses directly attributable to the occurrence of disease at the insured premises.

However, it’s important to note that this development doesn’t guarantee payouts for every policyholder.

Here are the key implications:

1. Evidence of COVID-19 at the Premises: Policyholders must provide clear evidence of COVID-19 occurrences at their insured premises to support their claims. This could involve medical reports, government data, or other reliable sources confirming cases on-site. Also consider communications and records with staff or visitors and the symptoms demonstrated.
2. Insurer Pragmatism: While the court avoided detailing evidentiary requirements, insurers are expected to adopt a pragmatic approach to avoid further litigation. Operators should work closely with their brokers and legal advisors to present robust evidence and negotiate claims effectively.
3. Time Sensitivity: Under the Limitation Act, policyholders in England have six years, and those in Scotland have five years, to bring legal action against insurers. For COVID-19-related claims, this means the window for initiating lega action will close by early 2026.
4. Evolving Claims Landscape: Since the FCA test case, over 100 court cases have been filed concerning COVID-19 business interruption claims. This evolving landscape highlights the importance of staying informed and proactive in addressing potential claims.