Landmark Decision to Help Small Businesses Receive Insurance Pay-outs

January 19, 2021


Thousands of small businesses could be eligible to receive insurance pay-outs as a result of Coronavirus related losses stemming from the first national lockdown.

In a landmark decision, the Supreme Court has found in favour of a group of small businesses with business interruption (BI) insurance policies, ruling that insurers are to pay-out on claims for financial losses incurred during the first national Coronavirus lockdown in spring 2020.

What led to the Supreme Court’s decision?

Last year, when many small businesses sought to claim under BI policies for loss of earnings suffered due to their businesses closing throughout the national lockdown, in most instances their insurers refused the claims, arguing that only a limited number of policies covered such unprecedented circumstances.

Consequently, the Financial Conduct Authority (FCA), representing the policyholders, brought a test case under the Financial Markets Test Case Scheme. The test case was fast-tracked to the Supreme Court, who considered 21 sample BI policy wordings and how they ought to have been interpreted.

After careful deliberation, the Supreme Court decided in favour of the FCA and the policyholders, in a decision which is likely to cost the insurance sector hundreds of millions of pounds in pay-outs.

What does the Supreme Court’s decision mean for small businesses?

The sample test case of 21 policies provides guidance for the interpretation of clauses and wordings of a wider pool of 700 BI insurance policies sold by around 60 insurance companies, and is expected to benefit a proportion of 370,000 businesses in total. Given the unprecedented financial strains many small businesses have been facing throughout the Covid-19 pandemic, the ruling is likely to offer a lifeline to many.

However, it is important to note that BI insurance policies for new and renewing customers will likely have been amended. As such, the Supreme Court’s ruling will only likely be relevant for policyholders who suffered loss of earnings during the first national lockdown of spring 2020.



Contact Our Team
Catherine Burke
View Profile
Damian Phillips
View Profile
Fflur Jones
Managing Partner
View Profile
Gareth Wedge
View Profile
Mark Rostron
View Profile
Nick O’Sullivan
View Profile
Owen John
View Profile
Rhodri Lewis
View Profile
Stephen Thompson
View Profile

I have worked with Darwin Gray for a number of years and the level of service, professionalism and timely response is second to none. I would highly recommend Darwin Gray to any business.”

Becs Beslee
Dice FM Ltd

Darwin Gray have provided us with a first-class service for many years now. They really take the time to understand our business and develop relationships which results in advice and support that is contextualised and effective.”

Rebecca Cooper
ACT Training

We have worked with Darwin Gray for several years and have always found their services and advice to be first class.”

Karen Gale
Stepping Stones Group

An extremely professional and sincere company who make time for your queries and understand the need to break down certain facts and information to ensure everything is understood perfectly. I would highly recommend the company to anyone looking for any type of legal advice”

Gwawr Booth
Portal Training Ltd

PSS has worked with Darwin Gray for many years. We have always received an excellent service. Prompt and professional advice and support.”

Ledia Shabani
Property Support Services UK Ltd

We have used several departments within DG recently and we have been very pleased with an effective, efficient and down to earth service. Very happy thus far and I expect that we will continue to use DG.”

Guto Bebb
Farmers’ Union of Wales

Darwin Gray offer us truly superb services. Very professional, quick and services available bilingually which is very important to us, highly recommend.”

Iwan Hywel
Mentrau Iaith Cymru

My “go to” in urgent and time sensitive cases for direction, support and advice. The team are quick to respond to calls or emails for advice and support on all matters. Always explain complex matters in a way a lay person can easily understand.”

Margot Adams
Guarding UK Ltd