UK Supreme Court rules insurers were entitled to deduct COVID government grants from business interruption claims in landmark pandemic insurance judgment

The UK Supreme Court has ruled that insurers were correct to deduct the value of government support — principally furlough payments under the Coronavirus Job Retention Scheme (CJRS) — received by businesses from successful business interruption (BI) insurance claims. The ruling settles a dispute that has run since the initial FCA Test Case of 2020, in which the Supreme Court held that many BI policies did cover pandemic losses. This follow-on question — whether government support payments reduce the amount payable under those policies — has been the subject of litigation across multiple jurisdictions and has kept BI redress levels in dispute for several years. The Supreme Court's decision is a significant victory for insurers, who have argued that the purpose of BI insurance is to indemnify actual financial loss, and that a policyholder who received government support to cover lost revenue has suffered a smaller net loss. The ruling has immediate financial implications: insurers will be able to reduce outstanding BI claim payments to reflect the government support already received, materially reducing the sector's total exposure. The decision is the most significant UK insurance judgment since the original FCA Test Case and is described as a landmark ruling by the court.

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