Covid BI: Final stage for lawsuits that put insurance lawyers into the spotlight
Eyes on the Law is a weekly column by Maria Ward-Brennan focused on the legal sector.
The covid pandemic exposed us to a lot of new things, including flexible working, but in a world of disputes, it resulted in an influx of business interruption (BI) cases in the courtroom.
The issues stem from the wording of BI insurance policies which went to a rushed appeal at the Supreme Court in 2021 by the Financial Conduct Authority (FCA) in a ‘test case’.
However, because of gaps, insurance lawyers became very sought after by businesses.
Insurance law is not the hottest seat a lawyer can sit in. However, this unexpected ‘once in a lifetime’ event we experienced as a result of the pandemic, shooed these lawyers in the limelight.
There have been countless notable cases in front of the courts, arguing over details left out in that ‘test case’, including causation, treatment of furlough and business rates relief.
As Aaron Le Marquer, partner at law firm Stewarts explained, “the cases have demonstrated the importance of insurance law to businesses large and small.”
He pointed out that “disputes over the interpretation of policy wordings have meant in many cases the difference between a business surviving or falling into insolvency.”
Pub company Stonegate Group, restaurant chain owner Various Eateries and Greggs all pursued claims against their insurers, with all three claims heard together. However, the High Court ruled broadly in favour of the insurers in October 2022.
All three businesses went on to appeal but Stonegate and Greggs decided to settle with their respective insurers. Various Eateries went to a trial at the Court of Appeal, but settled its case with Allianz for £16.4m after a ruling in its favour.
Another headline-catching case was the swarm of Premier League football clubs, including Arsenal, Liverpool, and West Ham, that merged together for multi-party lawsuit against six major insurers.
The clubs were suing over losses as a result of closures due to the pandemic lockdowns, seeking a pay out on their BI policies from insurers including, Allianz, Aviva, and Zurich. The parties were meant to be at a large trial this year, but all entered into separate settlements with their insurer.
Money on the line
With billions of pounds on the line, the insurers have been fighting the claim tooth and nail.
As Mark Pring, partner at Reed Smith noted, “there are huge sums at stake in the litigation and the insurance industry has had a pretty torrid few years.”
“It’s inevitable claims will be thoroughly scrutinised and challenged,” he added.
The final batch of covid BI cases have kicked off at the Court of Appeal this week, with two separate actions considering outstanding points.
The first started on Tuesday (running until Friday), which focuses on non-damage denial of access wordings as the court will hear various appeals from insurers in relation to this issue.
While starting next Tuesday, the Court will be asked to consider whether it is correct that insurers were entitled to deduct from any indemnity owed with the sums policyholders received from the government’s furlough scheme.
Le Marquer pointed out that “the potential consequences of these cases extend far beyond the long-running covid BI litigation.” He explained that it “may unlock large sums” for businesses.
He added that this BI issue “served as a powerful reminder that the risks facing modern day businesses are no longer predominantly physical”.
While Pring noted that “even amidst the current flurry of decisions there remains a significant number of cases working through the system.”
“Most lawyers in the sector would probably tell you that they’re busier than ever; so don’t expect the latest case to be the last we hear of business interruption litigation,” he added.