Many companies with business interruption policies were refused pay-outs when they filed claims last year, leaving them in an uncertain situation as they saw income plummet during lockdown.

At the time, some insurance providers said many policies did not specifically cover the unprecedented restrictions that the first lockdown meant for the UK.

However, the Supreme Court has now ruled in favour of a Financial Conduct Authority (FCA) test case that could see the insurance sector have to pay out hundreds of millions of pounds to small business customers.

Sheldon Mills, executive director for consumers and competition at the FCA, comments: “Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. This test case involved complex legal issues.

“Our aim throughout this test case has been to get clarity for as wide a range of parties as possible, as quickly as possible, and today’s judgment decisively removes many of the roadblocks to claims by policyholders.

“We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible.

“Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.”

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