A new High Court ruling could be a positive step forward for some tourism businesses who were denied business interruption insurance at the beginning of the coronavirus pandemic, according to Cumbria Tourism – the county’s official Destination Management Organisation (DMO).

Judges in a test case brought by the Financial Conduct Authority (FCA) yesterday ruled that some insurers should have paid out for losses caused by lockdown.

The test case used a sample of 21 different types of policy wording from eight different insurers. While the judgement is long and complex, it concludes that most – but not all – of the ‘disease clauses’ in the insurance policies considered do provide cover for businesses.

Earlier this summer Cumbria Tourism worked alongside partners including the Federation of Small Businesses (FSB) to proactively gather local case studies and evidence around business insurance. The research revealed that 75% of all tourism businesses were unable to make a claim, despite 93% having insurance cover for infectious diseases.

Therefore, this new ruling provides a glimmer of hope for tourism operators who felt their claims should have been considered by insurance companies.

Jim Walker, Chairman of Cumbria Tourism, says, “Cumbria Tourism has lobbied very hard to highlight this issue at a national level and I think this latest High Court ruling will be cautiously welcomed by those tourism operators who paid their business interruption insurance in good faith and feel they lost out at the beginning of the pandemic.

“We hope the judgement will help to resolve the uncertainty being faced by policyholders, but at the same time, it is likely to just be the start of a lengthy process and it is still unclear how many more policies it will ultimately affect. The FCA and defendant insurers are now considering exactly what the High Court means and we will certainly be keeping a close eye on this as it progresses.”

Keswick B&B Owner, Gary Lovatt, is the FSB’s national lead on the issue of business interruption insurance. He says, “This is a win for small businesses, but possibly only a partial win. There is still the possibility for either side in this case to go to the Supreme Court to appeal, but given that the High Court has very speedily given its judgement in this complex matter, we hope that insurance companies will not prolong the pain by taking this to appeal. Although the potential payments may be, in general, relatively small amounts, they could be fundamental to some businesses’ survival.”

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