1/18/2021 | Leisure

Court ruling on FCA COVID-19 Business Interruption Insurance Test Case

Last Friday 15 January 2020, the Supreme Court delivered its judgment on the appeals heard for the Financial Conduct Authority’s (FCA)’s business interruption insurance test case, with the court ruling in favour of businesses with interruption insurance being able to claim on COVID-19 business interruption.


This news will be a welcome glimmer of light to many in the hospitality industry. The sector has been one of the hardest hit during the COVID-19 pandemic, with thousands of businesses struggling to survive at present, having been forced to close for two thirds of the year in 2020.

The decision provides guidance for a wider pool of 700 policies, which could benefit some 370,000 small businesses throughout the country, although only some of these will end up with payouts. It will all depend on the wording used in the insurer’s policy, with only 21 sample policies tested in court, out of over 500 possible wordings. One hopes however the ruling will move to benefit a majority of the 130,000 hospitality business who have been impacted by the pandemic in some way. 

The full effect of this decision, besides helping pull many operators back from the brink, has yet to be realised and will take some time but we at Christie & Co suggest the benefits will be substantial. During the first lockdown many took advantage of the various government schemes which offered a mix of grants and loans. Lessees were able to negotiate rent deferments and most businesses saw debt escalate. Many have been fearing the time when these arrears will have to be paid back, which would affect investment in both staff and their businesses. Whilst these insurance pay-outs won’t cover it all, they should help a great deal. Just the price alone of re-opening and closing so many times has been high, with regards to wasted stock and other costs, on top of ever-increasing rent debt, all of which may be recouped to a degree. This news will be warmly welcomed by the sector.

With regard to property sales, this injection will allow owners looking at moving in the next few months to be more objective in the pricing of their business. The policy won’t replace turnover on which a business value is based but will be a top-up for a vendor who has to adjust their price to reflect the last years trading. In fact, we are already having such conversations, releasing many owners looking to move, and bringing further opportunities to market.

We will continue to closely monitor further announcements on this topic over the coming weeks and months.
We have a large and experienced team on hand who can offer advice and help navigate your business through these difficult times.

Please get in touch if we can be of any support to your business at this time.

Stephen Owens FRICS MCIArb
Managing Director – Pubs & Restaurants

E  stephen.owens@christie.com

Carine Bonnejean
Managing Director – Hotels
 E:  carine.bonnejean@christie.com

Jon Patrick
Director – Head of Leisure & Development

E jon.patrick@christie.com