Win for small businesses: UKSC ruling on landmark insurance case

On 15 January 2021, the UK Supreme Court issued a landmark ruling on a business insurance test case. The result of this case means that many small businesses will receive business interruption insurance payouts as a result of forced closure because of government restrictions resulting from the Coronavirus pandemic.

The blog will summarise the case, its importance and what it means for small businesses.


Case background and summary

The Coronavirus pandemic has caused many SMEs to temporarily close due to government restrictions and lockdowns, resulting in major losses for businesses.

During the first lockdown in March 2020, many small businesses made claims through business interruption insurance policies when they were forced to close. However, many insurers refused to payout, claiming the policies lacked sophistication to cover such unprecedented circumstances.

This uncertainty led to the Financial Conduct Authority (FCA) bringing a test case to clarify this issue. The High Court issued a decision on the matter in September 2020, but this was appealed by both the FCA and some of the insurers involved in the case.

The subsequent Supreme Court ruling on the test case found largely in favour of SMEs, meaning many businesses will now receive much needed payouts from business interruption insurance policies. The ruling stated that insurance clauses interpreted by the Court did provide cover for business interruption caused by lockdown measures and government imposed restrictions in response to the Coronavirus pandemic.


What does this mean for small businesses?

This is a welcomed and positive ruling for small businesses and means that many policyholders will have cover for losses caused by the response of the government to Coronavirus.

This also means policyholders do not have to resolve and clarify many key issues individually with insurance companies and can instead look to the ruling for guidance. Additionally, for many SMEs that have struggled to stay afloat during the pandemic, these payouts could be what stops them from closing their businesses down permanently.

The decision of the court will set a precedent for any similar future disputes and both policyholders and insurers now have clear guidance surrounding business interruption policies.


Find out more about business insurance and visit our Coronavirus business legal centre for more information and guidance on issues faced by small businesses and any relief available. If you have any specific legal questions, you can Ask a lawyer.

Sara Domi