The Supreme Court has made a ruling on business interruption insurance that could affect riding schools and other equestrian businesses. H&H speaks to the experts to find out what this means
A SUPREME Court ruling in favour of small businesses’ receiving payments from business interruption insurance policies during the pandemic could be good news for the equestrian industry.
In May 2020, the Financial Conduct Authority (FCA) launched proceedings to gain clarity for businesses trying to claim on business interruption policies owing to the coronavirus. The FCA stated there was a widespread concern about the lack of positive responses to claims and the basis on which some insurers were making decisions in relation to claims.
The FCA asked 56 insurance companies to provide information on their business interruption policies, following which a representative sample of policy wordings was selected. Eight insurers were then asked to participate in a High Court test case to review the sample. The FCA argued that clauses around “disease” and “denial of access” provide cover in the circumstances of the pandemic.
In September, the High Court ruled in favour of the FCA on the majority of the key issues. The judgement found that most of the disease clauses did provide cover, as did certain denial of access clauses – but because the FCA and insurers could not reach agreement, the FCA launched a “leapfrog” appeal to the Supreme Court.
On 15 January, the Supreme Court ruled in favour of the FCA. This means thousands of policyholders will now have their claims for coronavirus-related business interruption losses paid – but each policy needs to be considered against the judgement for a decision to be made.
Solicitor Hannah Bradley of the Equine Law Firm told H&H this was an “important judgement” for small businesses who have been affected by the pandemic. “Those who believe they may have cover, or who believe their insurer has wrongfully refused to pay them, should take action,” she said.
“The court has only reviewed a sample of policy wordings from the insurers who participated in the proceedings. However, it enables businesses to apply that guidance to their own policies.”
Association of British Riding Schools (ABRS) chairman Jane Williams told H&H the ruling was “positive” but that it is a “complex” matter, and the ABRS advises its members to speak to their insurers.
“Any payment at the moment is a salvation for centres who have had a tough year,” she said. “If a payment is enough to pay a feed bill or pay one member of staff, it all helps.”
Sally McCarthy, of Aberdeen Riding Club, told H&H the centre has a business interruption policy.
“It’s such an unprecedented situation, business interruption for Covid was never thought of. We had our business interruption in place for a horse infectious disease such as strangles, rather than any thought a pandemic would hit.
“We’re lucky that we have a diverse income source between having liveries and offering online training – whereas there are centres not in that position, and for them the business interruption insurance would be a crucial part of their crisis management,” she said.
Association of British Insurers director general Huw Evans said the insurance industry expects to pay out more than £1.8bn in Covid-related claims across a range of products, including business interruption policies.
“Customers who have made claims that are affected by the test case will be contacted by their insurer to discuss what the judgement means for their claim,” he said.
“All valid claims will be settled as soon as possible and in many cases, the process of settling claims has begun.”
A spokesman for insurance provider NFU Mutual told H&H the ruling does not alter the business’s previous assessment that its policies do not respond to Covid-related losses. He added that NFU Mutual’s policy wordings were not put forward by the FCA for consideration and the insurer was not part of the test case.
“Our policy wordings are written to be as clear as possible, reflecting that cover for the cost of a pandemic is beyond our risk appetite,” he said.
You might also be interested in…