Business Interruption Insurance: Why rejected claimants may be eligible for redress

Five years on and the knock-on effects of the COVID-19 pandemic are still being felt – especially by owners of small and medium-sized enterprises (SME’s). 

While many workers were furloughed and received support, those who were running their own businesses had to adapt to the very worst and most unprecedented circumstances. And it’s becoming clear that many business owners were denied the financial assistance they were entitled to in their time of greatest need.

But there is good news: the tireless efforts of business owners their lawyers has led to some important court judgements which have set a new legal precedent. There is now a chance for redress for those whose insurers denied their claims for financial help during the interruption of their businesses caused by the pandemic. 

We explain the ins and outs of business interruption insurance – and who may be able to claim for the financial support they were wrongfully denied. 

What is business interruption insurance?  

Business interruption insurance covers you for loss of income during periods when you cannot carry out business as usual due to an unexpected event.

This type of coverage is designed to help businesses recover lost income and cover operating expenses if you are forced to close your operations temporarily due to circumstances like a fire, natural disaster, or other disruptions like building works. 

What does it cover? 

Typically business interruption insurance covers lost revenue, rent or lease payments, payroll, loan payments, and relocation costs, ensuring financial stability during the temporary closure.

A pandemic scandal 

Business interruption insurance became a really contentious issue when the COVID-19 pandemic hit. 

As you would imagine, many businesses sought coverage for pandemic-related closures, assuming that the interruption caused by the lockdowns would have automatically been considered as part of these conditions. Yet in most cases, they were denied. 

Most standard policies required physical property damage (e.g., fire or flood) to trigger coverage, leading insurers to deny claims related to government-mandated shutdowns. 

Some lawsuits challenged these denials, while certain jurisdictions and policies introduced pandemic-specific endorsements. The crisis highlighted the need for clearer policy language and the potential for future pandemic-related insurance solutions.

Legal action on business interruption

Since the pandemic, several lawyers have dedicated themselves to fighting for justice for those who were denied support by their insurers – many of whom continue to suffer financially or have been forced to close their businesses. 

In recent cases, a Welsh bar and a group of hair and beauty salons being represented by the legal firm Hugh James were successful in getting the judge to order that their insurers pay out to them. 

This legal group secured a landmark Court of Appeal judgment clarifying insurers’ obligations. For the hair and beauty salons they represented, businesses that were exemplary of those worst affected by the lockdown restrictions, they achieved a £7.5 million arbitration victory.

These cases have set a vital precedent and cleared the way for other policy holders who had a “business interruption loss” clause in the coverage on their premises. 

Insurance companies may now have to offer financial redress to owners of SMEs affected by devastating financial losses during the pandemic. 

It is now hoped that policy claims can be quickly assessed to help ease the financial burden that businesses have endured since March 2020. 

Could you claim redress for your business interruption insurance?

There are thousands of business owners nationwide who had a “business interruption loss” clause in the coverage on their premises but had their claims denied during the pandemic. The new precedent set by Hugh James and their clients is paving the way for further redress for them. 

As legal interpretations continue to evolve and more cases come to light, the potential for a broader wave of successful claims is growing. 

If you think your business was unfairly denied support, now is the time to revisit your policy and watch this space – the landscape of business interruption claims is shifting, and it may just be in your favour.

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If you have any thoughts on this topic, or any other consumer issues you would like us to cover, feel free to get in touch with us at support@resolver.co.uk.