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Supreme Court judgement – the end of the insurance saga?
It seems remarkable that it has taken a High Court ruling and subsequent Supreme Court judgment to interpret whether there may be cover with some insurer products for COVID-19 financial losses. Here AIM Associate Suppliers Hayes Parsons review the judgement and ask – is this the end of the saga?
The judgment ran to 112 pages, and it is worth noting that insurers themselves were not being assessed, but various business interruption policy constructs. Although the judgment found in favour of policyholders, the Financial Conduct Authority believes this would impact about 370,000 policyholders, or some 6% of business policies in force. This is different to the tone of some media reporting at the time.
Essentially, if your insurer had previously declined to meet your claim, it is unlikely they will change their position, as in all likelihood the wording they provided was not assessed by the Supreme Court, and the insurer has legitimately declined to meet the claim. If they were
awaiting the result, and it appears they may provide cover, you should have received a communication from your insurer and they should be proactively getting your claim validated and settled where cover applies. Where there is cover, it depends on the actual policy wording in force, as the extent of coverage will invariably be found within the actual policy wording against a particular extension, perhaps with a capped sum insured and cover period.
When assessing the claim value, again it depends on the wording in force, and for some wordings operational savings made during closure would be considered (for example, furlough payments). Any grants received during the insured period should not be deducted from
the claim as, although not binding, there is an expectation following discussions between the insurance industry and the government, that these will not be taken into account. If you find they are, this should be challenged. If you are still unsure whether cover applies to your policy, speak to your insurance broker.
The judgment provides the legal steer of policy wordings, it does not say there is or is not cover, as that depends on the actual situation for your museum and the wording of your policy. Should you remain unhappy with the insurer declining your claim, there is the option to investigate civil action, although we would recommend serious consideration be given to this.
The test case has brought into sharp focus the plethora of different style policy wordings in the market, even when provided by the same insurer. Where wordings were found to provide cover, it was unintentional and going forward there will be exclusions relating to communicable diseases, reduction in sums insured for various extensions, or the removal of disease cover in its entirety. The insurance industry is going through a period of change, and coupled with the reduction in covers, premiums are increasing. We would recommend early engagement with your insurance broker at your next renewal and it may be worth a second opinion.