Many businesses around the UK will have taken out Business Interruption Insurance policies (“BII”) in the hope that if they suffer an incident that causes them to lose profits they could claim against their policy.

When the impact of COVID-19 hit and businesses were forced to shut, not trade or trade differently which reduced their profits, they may have turned to their BII policy to see if they were covered.

However, many businesses will have been left disappointed in the knowledge that their BII policy does not appear to cover them based on the standard wording in that no “physical damage” has occurred to  their assets (i.e. from an incident such as flood or fire). However, policy extensions may be present that may enable a claim to be made for example, wording regarding communicable diseases or non-damage denial of access, thereby making a claim possible.

The Financial Conduct Authority’s Test Intervention

However, the “devil really is in the detail” in respect of whether you may or may not be covered. So much so that the UK’s Financial Conduct Authority (the “FCA”) announced that it will run a test case during July to provide guidance in respect of BII claims as a result of COVID-19. The FCA are reviewing a number of insurers’ policy wording to establish whether a valid claim could be made.

The FCA have invited policyholders, insurers and other stakeholders to provide comments and questions which they will seek to address in this hearing in July with their intention to make the decision in respect of which policy wording would warrant a BII claim to be legally binding. Clearly, there will be some deviations from the policy wording that they review, but it will at least set some guideline for whether a BII claim is valid.

Professional opinions

We sought the views of other professionals dealing with BII claims during COVID-19:

Duncan Sutcliffe, Director of Sutcliffe & Co Insurance Brokers, said:

“When the COVID-19 pandemic started impacting businesses many turned to their business interruption insurance but it was soon pointed out that the vast majority of policies purposefully do not provide pandemic cover, in the same way that insurance rarely covers huge unpredictable events like war. However, there are a small handful of polices which may inadvertently be providing some cover due to a badly written policy wording. The only way to know if you are covered is to carefully examine the small print.”

Adam Finch, Dispute Resolution Partner at Harrison Clark Rickerby Solicitors, added:

“It’s not quite as stark as the insurers are suggesting.  The policies are not as clearly defined as they would like.  So do take a very careful look at your policy to determine whether there is an opportunity to make a claim to your insurer.  If in doubt, proceed with a claim.  The FCA’s test case will assist in resolving some of the ambiguity around common terms.  By advancing your claim, the insurer will be aware of your interest and will be expected to formally respond after the test case has been determined.”

Martin Chapman, Forensic Accounting Partner at Baldwins Accountants, said:

“Even when you get over the hurdle of having a valid BII Claim, the next step is quantifying your losses. There may be further restrictions on what is claimable, including considerations of the financial support you may have had from the Government. Making your claim easy to follow, robust and reasonable will be the secret to a successful pay out”.

Clearly, getting a valid BII claim accepted will be challenging but all is not lost and the FCA stepping in shows how serious they are taking it.

We are here to help

We can help you if you think you have a valid claim by reviewing the policy wording, putting you in contact with our vast network of intermediaries if further clarity is needed and then if a claim can be submitted, we have the experience in quantifying your losses.

Furthermore, we encourage you to keep a watch on the FCA’s website that they continue to update in respect of the BII test case. We will also be providing commentary and observations on the results of the FCA case once it has been announced.”

If you have any questions on the above or want to discuss this further, please do not hesitate to contact your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 24 June 2020. Laws and tax rules may change in the future.