Business Interruption Insurance Claims Post-Covid: The Question of Timing

The Covid-19 pandemic and the subsequent government-mandated lockdowns had a profound impact on businesses across the United Kingdom. 

Many enterprises, from small high street shops to large hospitality venues, suffered significant financial losses as a result of enforced closures and reduced trading. 

In the wake of these disruptions, Business Interruption Insurance (“BII”) became a focal point for many seeking financial relief from their mounting losses.

Business Interruption Insurance: An Overview

BII is a type of insurance designed to cover loss of income and additional expenses when a business is unable to operate due to an insured event. 

Traditionally, this might have included events like fire, storms or flood however, the pandemic posed new and unprecedented challenges, leading to widespread disputes between policyholders and insurers regarding whether Covid-related losses were covered by the BII policies upon which policyholders sought to make their claims. 

That was especially the case as Covid did not cause businesses to suffer physical damage to property which was traditionally the trigger for coverage for financial losses suffered by businesses  under BII policies. 

The FCA Test Case

As claims were denied or delayed by insurers, policy holders turned to the courts and other dispute resolution mechanisms such as arbitration or the Financial Ombudsman Service to determine the matter; the Financial Conduct Authority then sought to provide much-needed clarity and certainty by bringing an unprecedented test case against eight insurance companies asking the High Court, and then the Supreme Court, to determine some of the most important issues concerning relevant non damage BII policies.

The Supreme Court judgment in January 2021 confirmed that certain non-damage BI policies did, in fact, provide cover for losses arising from the pandemic.

The January 2021 judgment is summarised in this article we published at the time.

The judgment resulted in a fresh wave of successful claims but also highlighted the complexity and variability of individual circumstances and policy wordings which are by no means uniform across the insurance industry.

There have been numerous other cases relating to BII following the pandemic which are referred to in this article published in January 2024.

The Looming Contractual Limitation Date

Despite these legal victories, one critical factor now faces policyholders: the limitation date. 

The contractual limitation period refers to the specific timeframe during which a party must bring a claim or commence Court proceedings, failing which the right to pursue the claim may be lost. 

The statutory limitation period for a breach of contract claim is set out in the Limitation Act 1980 and allows for a period of six years from the date on which the breach occurred for an action to be brought. In summary, this may be the date upon which the claim was first made under the BII policy or the date upon which the claim was refused by the insurer.  Many BII related claims may therefore be due to lapse in March or April 2026. That could leave thousands of businesses unable to recover their Covid related losses. 

Even if contractual limitation claims are not yet time barred, many statutory limitation periods are now potentially approaching their end if the BII related losses were suffered later on in 2020 (for example, they related to subsequent lockdowns in 2020/2021 and the Government enforced business closures). There is also the issue of whether businesses may have legal claims against their insurance brokers for failing to put in place adequate BII cover if they do not recover their losses from insurers under the BII policy.     

For businesses that have not yet resolved their claim, or where negotiations with insurers are ongoing, it is vital to seek legal advice as soon as possible to avoid missing this crucial deadline and to avoid the claim becoming time barred.

This is particularly relevant given there are legal challenges continuing through the courts which are likely to set precedents in relation to whether for example insurers are able to take account of furlough payments made to policy holders when paying losses under the policy or, in the alternative, whether additional payments are made under the relevant policy.  The Supreme Court is due to hear the appeal in the Bath Racecourse Company Limited claim on 11 and 12 February 2026 on these issues meaning judgment may be handing down settling remaining relevant questions pertinent to the question of cover under certain BII policies once the statutory limitation date has passed.

Another issue which is yet undetermined by the Court is how policyholders can prove an occurrence of Covid at the insured premises for the purpose of some “at the premises” clauses in BII policies. Further Court cases may be required to determine that issue. 

Other outstanding issues in dispute relating to BII policies include:

• Aggregation of limits: Disputes over applying policy limits per premises vs across a group under composite policies.
• Interpretation of “any one loss”: How indemnity caps apply—per event, per location, or per claim.
• Clause scope and causation: Continued challenges on how disease and prevention-of-access clauses trigger coverage.

In the absence of either entering into a valid standstill agreement with the insurer which would effectively stop the limitation “clock” from ticking, or the precautionary issuing of Court proceedings, the prolonged passage through the courts of these BII claims may adversely  impact policy holders by frustrating their ability to recover from validly made claims which were incorrectly refused or reduced by their insurers.

Key Takeaways for Businesses

• Take immediate action if you have an unresolved claim or dispute.
• Seek professional legal advice as to how you might preserve your legal rights and remedies.
• Gather together all documents and correspondence related to your losses and your insurance claim.

In summary, while the courts have provided some clarity and relief for businesses affected by the Covid-19 pandemic, the ticking clock of limitation dates means that prompt action is essential for those businesses with unresolved BII related claims. 

Missing a deadline could mean losing out on compensation to which you may otherwise be entitled.