Editor: The High Court ruling that some insurers should have paid out for losses caused by lockdown is a major victory to policyholders and the thousands of businesses that had trading interrupted by Covid-19.
The decisive judgment will impact the health of the UK economy and the fate of heavily-disrupted sectors such as leisure, hospitality and retail – companies that bought business interruption insurance in good faith and whose future depends on the pay-out.
The court found that the key counterfactual for assessing loss should be where the affected business would have been had Covid-19 not struck. The pandemic and lockdown meant businesses could not continue trading as normal and are therefore entitled to receive payouts on their insurance.
The judgment provides a lifeline to businesses up and down the country.
If this is appealed in the coming days, the appellate court will have a delicate balancing act on its hands. If the Supreme Court rules in insurers’ favour, we could see a titanic wave of law suits against insurance brokers for alleged mis-selling as policyholders seek redress via other routes.
But a further ruling against the insurers could bring many businesses back from the brink and save thousands of jobs. Insurers could be forced to review previously rejected cases to settle those claims, because the FCA expects the judgment to be applied and re-applied to outstanding or rejected claims.
If there is an appeal, then today’s High Court ruling only marks the end of Act 1 of this legal drama.
Julien Luke, commercial litigation partner, TLT