The Supreme Court ruling on business interruption insurance saw the wording of several policies contested, with the court ruling that insurers had to pay out to pubs affected by the coronavirus lockdown last year.
However, the case brought forward by the Financial Conduct Authority (FCA), only looked at policies with ambiguous wording, meaning the majority of policyholders have still been denied cover.
Hospitality insurance specialist Steven Swift of Sector Associates said coverage of the ruling led many to believe they could receive a payment for lost income as a result of the Government ordered shutdown of their business.
He said: “[The ruling] was supposed to have provided a lot of clarity, I think it has provided a little more confusion if I’m being honest.
“I think in the mainstream media how it was reported led people to believe they were automatically getting paid which was plainly incorrect.”
Virus 'didn't exist'
Many operators’ policies include wording containing a list of around 30 diseases. “Obviously Covid won't be on that list because it didn't exist," Swift explained. "The FCA, the regulator, said 'well that is fairly clear, so that one is not going to go to court'".
Another form of policy includes wording that states businesses are covered if a disease was discovered "at the premises" and led to closure.
Although operators with a relevant policy may have a claim if they could prove coronavirus was found on their premises this would be difficult to prove Swift said. “Proving you had it at the premises is quite difficult and pubs were mostly closed because of the Government not because of a health authority closing them down.”
Insurance policies for the sector were “not designed for pandemics,” Swift said.
The FCA published a list of business interruption policies that may be affected by the court ruling. However, policies with wording included in the test case count for about 7% of clients, Swift estimated.
While there has been talk of further litigation on the matter, Swift warned this would be a "brave, expensive and lengthy" decision given the FCA had already looked at different wordings and decided some were not worth legal pursuit.
Operator Dave Hattersley runs the Old Exeter Inn in Newton Abbot, Devon, and said learning his site was not eligible for any cover had left him with a “terrific feeling of foul play”.
He said: “Some people will have been paying these policies for years and years in good faith, thinking they were covered. To your ordinary man, an infectious disease is an infectious disease and it's interrupted his business.”
Hearing the court had ruled in favour of policyholders had brought "a real sense of relief that fairness had shone through the dark clouds," Hattersley explained. "The staff were suddenly happy and positive again. It was like a weight had been lifted and that right had been done."
Hattersley said thousands of operators in the same boat will share his disappointment and frustration. "I think people will simply take their own risks in future," he added. "After all, these fairweather friends were never there for you in the first place. You just didn't know it until it was too late."