As the fallout from Covid enters the courtrooms of the country, Stuart Farr reports on two major cases that might impact your business, and looks ahead at more litigation to come.

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Those quintessential aspects of trade and commerce—shaking hands on a deal; visiting a customer or supplier at their premises; handling the product before you buy; and many other forms of social or face-to-face interactions—have all but disappeared over the past 12 months.

As many significant gun trade shows are forced into the remote settings of our studies, backrooms or empty offices, and while many sales are restricted to being conducted online, it does make one wonder whether there is any light at the end of the tunnel.

The legal system has been similarly forced to adapt. So-called ‘Nightingale Courts’ sprang up around the country to facilitate the provision of a justice system restricted by the confines of social distancing. In the civil, technology and construction and commercial courts, much of their business was transferred online, and even dispute resolution mechanisms, such as mediation, became a remote activity.

However, despite their apparent emptiness the courts have not been idle and there have been some important decisions recently, flowing from the Supreme Court in particular, that could impact on your business. 

Covid interruptus

The first decision (which I shall call the Supreme Court FCA test case decision) relates to that thorny issue of business interruption insurance. Many business policyholders caught a cold on that last year when, after the first lockdown was imposed, many insurers rejected claims made under the policies they had sold. 

The court action was originally brought by the Financial Conduct Authority to resolve a number of test cases surrounding two main types of insurance clause found in business interruption policies: those related to cover for infectious or notifiable diseases, ‘disease clauses’; and clauses that concerned prevention of access to premises and public authority closures or restrictions, ‘prevention of access clauses’. More than 370,000 policyholders were affected, covering around 700 types of policies.  

The decision of the Supreme Court was complex but the overall effect was to confirm that many disputed policies did, in fact, provide cover, thereby opening the way to claims being settled with better levels of payout.

If your business is now entitled to claim under the ambit of the Supreme Court’s decision, that is all to the good. However, here’s the rub—the vast majority of businesses with business interruption insurance will be unable to do so and the essential reason for that is historical.

After the 2003 SARS pandemic, many insurers severely restricted their policy wording. In the case of disease clauses, for example, insurers limited their policies to specifically named diseases—and no others. In other words, they restricted the policies so as to expressly exclude SARS/COVID-type infections that could spread to pandemic proportions.

These policies fell outside the Supreme Court’s ruling and many businesses now believe they are stuck with the situation—having paid a lot for a policy that they thought would protect them but seemingly left them with no form of legal redress at all. 

Well, maybe not…A secondary level of potential claims is now beginning to emerge. Many business interruption policies were arranged through insurance brokers. Those brokers had duties to act with reasonable skill and care and therefore should have given appropriate advice to businesses with regard to their insurance needs. It is clear that in some cases no advice at all was given as to the effect of the policies their clients would be purchasing—or, importantly, the policies they should be purchasing. 

Many insurance policies nowadays are sold purely on price but, more often than not, the details of the policy wording are never fully explained.  This is more noticeable in cases where the insurers (and policies) are swapped around by a broker from year to year in order to secure the best deal (for them and you).

So, for example, a business in the gun trade may have had an enforceable disease clause in its policy during 2018/19 only to find that the broker’s shopping around resulted in a non-enforceable policy being purchased to cover the critical periods in 2020.

The net result is the business relies on the broker and believes it is still buying an ‘all risks’ policy—but no one points out (until it is too late) that the change to a different insurer also came with a change in policy wording and cover. In other cases, businesses might have instructed a broker to obtain ‘full cover’ only to find the cover was way off the mark. In some cases, brokers advised businesses they did not need any cover at all or even failed completely to advise on the existence of business interruption cover.

Presently, the brokers are sitting tight and quietly helping those with cover falling under the Supreme Court ruling to progress their claims. They are not being active with businesses that fell outside the decision, leaving them to lick their own wounds in fear of being bitten by a claim themselves. 

If your business has been affected by all of this and you believe your broker may have let you down, then please get in touch. All cases depend on their particular facts but a brief review may help provide some clarity and enable you to make informed decisions—at least about your future intentions regarding risk and insurance for your business.

Uber alles

Turning now to the second of the recent Supreme Court decisions, which I shall abbreviate to Uber BV -v- Aslam. At the time of writing, the decision in this case is new and is still being considered and digested. The essence of the outcome, however, is going to be far reaching because it means that many so-called ‘self-employed’ workers could now in law be regarded as employees and so be entitled to receive statutory benefits such as holidays, a minimum wage and even pension entitlements. 

Naturally, the Uber decision goes hand in hand with the Inland Revenue’s considerable interest in the subject due to the impacts it will have by increasing (it is believed) tax revenues through income tax, national insurance and restrictions on reliefs—please note the changes implemented via IR35. Many smaller businesses rely on the cost savings achieved through having people with ‘self employed’ status, so if this is going to impact you significantly, do consider taking appropriate advice.

Other topics beginning to emerge—and which may see court intervention—concern workplace testing and compulsory vaccination of employees. Many employers are becoming concerned to ensure that business returns to ‘normal’ as quickly as possible and that one route to achieve that is by ensuring all staff are regularly tested and receive the vaccine.

The issue is the subject of some media attention and requires sensitive handling because, again, cases tend to be fact specific and will hinge on existing company policies and contracts of employment. From a legal perspective at least, the wheels on the bus will continue to turn and, occasionally, run through deep puddles or throw up muddy issues for businesses to contend with.

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