Interruption insurance

Greggs the bakers have been in the news regarding a legal case against its insurer. Prior to the Covid pandemic, many businesses thought that they were taking prudent steps by paying for business interruption insurance. It is often more expensive and is designed to protect businesses in the event that they cannot trade due to unforeseen circumstances. Thus, when the national lockdown was imposed in March 2020, many businesses thought that they would be protected having taken out the insurance. What the businesses did not expect was for the insurers to try to claim that a global pandemic was beyond the scope of most policies and thus was not an event which should trigger payment under the policy. Many business owners were left out of pocket, having thought that such an interruption was precisely the circumstances when the insurance should pay out.

A test case was brought, the result of which was that many policy holders had valid claims. One such policy holder is Greggs. It brought claims in respect of business interruption loss and related losses/costs caused by Covid-19. The central point of relevance to Greggs is whether the closures brought about by Covid restrictions counted as a 'single occurrence' which would severely limit the recovery under the insurance or whether, as Greggs argued, each of the government measures was a 'separate occurrence'. The court held that, in general terms, Greggs was correct. The differential is huge – the insurer claimed that the liability should be capped at £2.5 million for the 'single occurrence', contrasted with Greggs' claim of £150 million.

A claim against insurance can be worth a lot to any business. The courts have said that each business interruption policy must be considered against the test case to work out what it means for that policy. In the light of recent case law, anyone wishing to make a claim under their business interruption insurance should consider taking specialist advice to ensure that they are clear as to the terms and the size of any potential claim. Whilst most businesses will not be making £150 million claims, for many, a successful claim will be make or break. Or in Greggs' case, make or bake.

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