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Law firms that had Business Interruption Insurance can now look to receiving a pay-out on their policies following a ruling from the Supreme Court.

The decision backs small businesses as the Supreme Court decided in favour of the insured on Friday 15 January 2021. The FCA said ‘many thousands of policyholders will now have their claims for coronavirus-related business interruption losses paid’. This will come as a relief to law firms that have been waiting for support after the pandemic impacted their business in the spring of 2020.

In the first lockdown of last spring, a number of law firms and other businesses made claims through business interruption insurance policies for loss of earnings when they had to close their doors.

Most insurers refused to pay, arguing only the most specialist policies had cover for such unprecedented restrictions.

It was agreed that a selection of policy wordings should be tested in court, setting the parameters for what would be considered a valid claim.

The ruling provides guidance for a wider pool of 700 policies, potentially affecting 370,000 Solicitors and smaller businesses.

Giving the court’s ruling, Lord Hamblen said the court accepted the arguments from representatives of policyholders and dismissed appeals from insurers against an earlier judgement finding in policyholders’ favour.

The complex ruling covered issues such as disease clauses, whether solicitors and other businesses were denied access to the properties, and the timing of lost earnings.

This test case will have a dramatic impact on solicitors firms that were denied a pay out against their policy and can recover loss of earnings from being unable to operate from their offices during the lockdown last March.

Sadly I am still hearing tales of law firms that did not have such policies and poor IT systems that are forcing all fee earners and support staff to come into a packed office with little social distancing.

At last the forward-thinking law firms that had BII insurance and a robust IT platform can receive the money due to them.

Viv Williams

Viv Williams is the Director of Viv Williams Consulting. He is an experienced consultant to law firms on the topics of strategy, management, practice, development and marketing. Viv is also a legal commentator, author, public speaker, non executive director of law firms and director of several companies supplying services to the legal profession.