Insurers have been ordered to pay out business interruption claims to the tune of £1.2 billion in a landmark Supreme Court ruling.
But as small businesses across the country celebrate the win, the ruling has come too late for some who have already had to lay off staff or even close altogether.
Back in April 2020, HuffPost UK reported how thousands of small businesses had been “abandoned” by their insurers after their claims were deemed ineligible for a series of bizarre reasons, including there not being an outbreak on the exact business premises and the use of the word “plague” in policies interpreted by insurers to mean only specifically the bubonic plague.
The arguments over wordings put forward by dozens of insurers – ruled against on Friday by Supreme Court judges – meant that thousands of small business owners faced huge debts and the prospect of losing their firms, despite paying business insurance for years.
The case was brought forward on behalf of the companies by the Financial Conduct Authority (FCA), with their executive director for consumers and competition Sheldon Mills saying on Friday that the “judgment decisively removes many of the roadblocks to claims by policyholders.”
The regulator was criticised in May by the Hiscox Action Group (HCA), a group of hundreds of businesses affected by Hiscox’s refusal to pay out, saying that the drawn-out process of legal action – as opposed to an outright decision from the FCA – left businesses and insurers “in limbo”.
James Ollerenshaw, owner of the Drawing Room salon in Spitalfields, east London, was told by his insurer back in March that his business wasn’t covered because their policy did not list Covid-19 as a “notifiable disease” – because it was signed before Covid even materialised – and they would not retroactively add it to the list.
While he welcomed the judgment on Friday, he said it was still too early to really understand what it meant for his business.
He said: “While today is good news, we’re disappointed it had to take this route all the way to the Supreme Court, which has taken an enormous amount of time and has been very costly for the regulator – which is ultimately the taxpayer – to do what I and other businesses like mine felt that the regulator, the FCA, should have judged for itself.
“What’s the point of a regulator if it can’t regulate? Amid all the inevitable delays involved with taking this as a court case, the appeals, everything, there’s been loads of businesses and jobs which have gone in the meantime.
“The impact of this on our business has been existential really, we’ve been closed for most of the past nine months so it’s been a terrible year. Through that time we’ve accrued a lot of debt, and getting a payout towards that – though I don’t think it would cover it – would make a huge difference as to whether the business can survive or not.
“I think that’s going to be the case for a lot of businesses, particularly as a lot of the government support starts to unwind.”
The FCA has always maintained that pursuing legal action would be the quickest route to seeking clarity for businesses and insurers alike, telling HuffPost UK in May: “Our legal action is designed to avoid the protracted legal processes which might be involved in pursuing individual cases.
“It is the quickest route to clarity and by covering multiple policies and insurers, it will also be of most use across the market.”
In a statement released on Friday, the FCA said: “As we have recognised from the start of this case, tens of thousands of small firms and potentially hundreds of thousands of jobs are relying on this.
“We are grateful to the Supreme Court for delivering the judgment quickly. The speed with which it was reached reflects well on all parties.”
Daniel Duckett, part of the HCA steering group and owner of the Lazy Claire Patisserie in Belfast, described the moment the judgment came through as “a big relief”.
“They didn’t just rule in our favour on a couple of issues, they ruled in our favour on almost everything,” he said.
“Now we can actually move forward with our claim. Seeing the other reactions from the business owners we’re in touch with on Twitter, they’ve been so happy because a lot of them had no response [from their insurers] and were told that they didn’t have a claim.”
Discussing the business owners who faced losing their business, Duckett said: “That was my initial frustration – back in May or June when we first spoke with the FCA – that there were businesses dying.
“I don’t think the guilt falls on the FCA by any means, because this really was the quickest option they had available to them, the guilt falls squarely on the insurers, especially after today’s ruling which said: ‘There’s clearly cover’.”
He added: “I told the insurers this day would come. We knew what would happen, and now they’re rightly being held to account.”
Oliver Meek, executive director of the historic Rio Cinema in Dalston, east London, said Friday’s judgment was the first time in many months his staff could “celebrate a little bit”.
Despite surviving two world wars and the Spanish Flu the Rio, now run as a charity, was told by its insurer that it wasn’t eligible for a payout as an actual Covid outbreak hadn’t taken place on the premises, and their “denial of access” clause only related to circumstances such as a police cordon, as opposed to a national lockdown.
He said: “The whole past nine months has been characterised by complete uncertainty, so today feels like the first bit of certainty in a very long time and the first bit of news we can celebrate a little bit.
“It means that, while we don’t know how soon, we will eventually get something back to cover our losses, certainly from that first lockdown period which was really brutal for us.”
The Rio has so far been able to retain all of its staff, but Meek pointed out that many other entertainment and hospitality-based businesses had not been so lucky.
“Every time I go back into the office I see local restaurants and bars we’ve worked with regularly that have closed and gone,” he said.
“We will be counting the cost of this because it’s going to affect the whole sector. Cinema is an ecosystem, and if we lose a lot of cinemas it’s going to make it harder for small film distributors.
“Even though, hopefully, we’re able to survive, there’s going be a knock on effect, and it’s really said for the sector as a whole. I really feel for people who’ve had to pack up and just couldn’t wait any longer – it’s awful.”