Since the beginning of 2020, almost everyone has been affected by the Covid-19 pandemic. This, of course, includes businesses.

In the United Kingdom, the government began introducing measures to deal with the public health situation from March 2020. These measures included a mix of formal legislation (Acts of Parliament and regulations called ‘Statutory Instruments’) and informal advice and ‘guidance’.

Some of these measures had the effect of closing business premises. This obviously caused businesses to stop trading and, therefore, lose money. Some businesses had insurance policies which had clauses called ‘business interruption’ clauses. The purpose of these clauses was to protect businesses if these ‘business interruption’ events happened.

Some businesses claimed that they were covered (protected) by business interruption clauses in their insurance policies. Several insurance companies refused to make payments to businesses under the policies. They claimed that the wording of the clauses did not cover the kind of business interruption which had happened.

The Financial Conduct Authority [1] therefore decided to bring legal proceedings against some of the insurance companies. The main purpose of this was for the court to look at the business interruption clauses and decide if the wording did cover the situation – and therefore bring clarity to the law in this area.

On Friday 15th January 2021, the Supreme Court of the United Kingdom handed down (gave) its judgment in the case of Financial Conduct Authority v Arch Insurance (UK) Ltd & Others. The court looked at 21 sample insurance policy wordings. In order to decide the case, the court had to interpret the clauses. In a future post, we will look at the principles which English courts apply when deciding the meaning of disputed contract clauses.

The Supreme Court found substantially in favour of the Financial Conduct Authority and dismissed the appeals of the insurance companies. The judgment now opens the door for thousands of businesses to receive payments from their insurance companies for business interruption due to the public health situation.

The Financial Conduct Authority issued a press release following the judgment. It said that it would be working with insurance companies to ensure that claims are paid quickly. This includes, where necessary, making interim payments.

[1] The Financial Conduct Authority (FCA) is a financial regulatory body in the United Kingdom. It focuses on the regulation of almost 60,000 financial services firms, such as insurance companies. It also aims to make financial markets work well, both for businesses and individuals (consumers).

© Cambridge Legal English Academy 2021

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