High Court ruling on business interruption insurance could mean make or break for Scottish hospitality operators during winter


Business interruption insurance payouts to Scottish hospitality businesses that were closed by the pandemic between 20 March and 4 July could mean the difference between surviving the winter months or not after the High Court in London ruled that insures were liable to pay out most (but not all) of the claims after UK businesses were denied payouts when insurance companies argued policies didn’t cover COVID-19.

Said Scott Murray, co-owner of Inverness-based Cru Holdings which has a seven-strong hospitality portfolio, “It can be appealed so we’re not getting too excited, but if it is upheld and the pandemic goes on for another six to nine months and with the end of the furlough scheme looming and our coffers empty, it could mean the difference between our business surviving the winter or not as well as protecting jobs too of course.”

The test case was brought by The Financial Conduct Authority (FCA) and it is estimated that some 700 types of policies across 60 different insurers and 370,000 UK small businesses of all types that were closed could potentially be affected by the case, equating to some £4 billion in claims.

Stephen Montgomery owns the Townhead Hotel in Lockerbie and he told DRAM that the ruling could potentially “soften the blow” of an already severely beleaguered cash flow in his business. He told DRAM,  “I fully expect this ruling will be appealed but if it does stand, any cash we do get back is merely going to soften the blow for my business by giving us a wee bit extra cash flow because of the stage we’re at now, and seeing us through to the other side of winter. This is not a ‘book a holiday to Barbados’ scenario.

“What’s more, this money should have been paid anyway because you take out business insurance in good faith that you will be covered for loss of business. Nobody could have predicted this, so it makes me wonder what would happen if another disease swept the globe.

“There should be greater clarity on what insurers do and do not cover.”

If insurance companies do appeal the ruling, it will then go to the Supreme Court and if it rules against insurers then this could bring hospitality businesses back from the brink during the challenging winter months.  If it rules in favour of them, it could lead to a wave of law suits against insurance brokers for alleged miss-selling of policies.