Insurers accuse small businesses of trying to 'reverse engineer' COVID-19 cover

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·2 min read
BIRMINGHAM, UNITED KINGDOM - NOVEMBER 30: Raymond Blanc at BBC Good Food Show Winter 2013 held at the NEC on November 30, 2017 in Birmingham, England.  PHOTOGRAPH BY Graham Stone / Barcroft Images (Photo credit should read Graham Stone / Barcroft Media via Getty Images)
Celebrity chef Raymond Blanc is one of the business owners who has clashed with their insurer over pandemic coverage. Photo: Graham Stone / Barcroft Media via Getty Images

Lawyers acting on behalf of major UK insurance companies have accused small businesses of trying to “reverse engineer” coverage for the COVID-19 pandemic.

At the start of a four day appeal in the Supreme Court on Monday, Gavin Kealey, a lawyer for insurer MS Amlin, said: “If these insurers wanted pandemic cover or epidemic cover on a national scale, then they didn’t get it... You can’t reverse engineer those cases,” according to Reuters.

Kealey and other lawyers are acting for major insurers in an appeal against an earlier ruling that found insurers were largely liable for payouts to small business customers forced to shut due to the national lockdown earlier this year.

READ MORE: Court to rule on insurance payouts to small businesses

Insurers had argued that business interruption clauses in coverage did not apply to national lockdowns, which were not foreseen when policies were written. They added that infectious disease clauses were meant to cover localised outbreaks rather than international pandemics.

The argument angered many small business customers, including celebrity chef Raymond Blanc who has had a public dispute with his insurer Hiscox (HSX.L).

The Financial Conduct Authority (FCA) mounted a fast tracked legal challenge on behalf of small businesses to gain clarity over the coverage. The High Court largely sided with small businesses in a ruling handed down in September.

READ MORE: High Court ruling 'provides hope' for small firms on coronavirus insurance claims

Insurers are appealing the verdict in the Supreme Court. They say COVID-19 and national lockdowns were not foreseen when policies were written and therefore can not be covered. The industry also argued that a decision to allow payouts would be ruinous for many companies. Insurers are liable for payouts worth tens of millions of pounds.

The FCA and a small business pressure group are also appealing the High Court ruling, seeking more clarity on issues such as partial closure and reduced payments.

The four day virtual hearing began on Monday and is due to run until Thursday. The FCA will make its arguments on Tuesday.

WATCH: Small businesses hanging by a thread in the COVID economy