A bar and nightclub denied a covid payout despite paying £2,000-a-month insurance premiums has won a landmark legal battle – and could receive up to £100,000.
The Velvet Music Rooms & Sugar Suite club on Broad Street will be among the beneficiaries of a Supreme Court ruling which found in favour of small firms receiving payments from business interruption insurance policies.
Its owners are hoping to receive the first instalment in the summer and the cash will be used to pay off debts accrued because of the health crisis.
Dani Hadley, who runs the family-owned bar and club with her sister Eilis Collins, paid £2,000 a month on the policy since the venue opened in 2005 and was stunned when insurers rejected their claim.
It was one of a wide range of businesses such as pubs, cafes, beauty salons, and wedding planners which made business interruption policy claims on losses caused by the first national lockdown in March.
Ms Hadley said the court ruling meant the business “could receive up to a six-figure sum” – which will help pay off the mountain of debts she had accrued over the pandemic.
The businesswoman, who is six months pregnant, said: “The past year has very stressful but finally it is over.
“My family and I can look forward to a much better 2021. We are one of the very few lucky ones. Only five per cent of UK businesses had taken out this pandemic cover so we are counting our blessings. I just wish it had been more straightforward.
“When we were forced to close at the start of the first lockdown last March we had a very positive phone call from our broker saying we were really lucky, we were one of the few to be able to get something from our policy.
“But then the insurance company decided to put up a fight.”
The Financial Conduct Authority brought the test case last year on behalf of businesses with policies at eight insurance companies.
Insurers, including QBE Argenta, Arch, and MS Amlin, argued business interruption policies did not cover the widespread disruption of a global pandemic.
But Supreme Court judges rejected the insurers’ arguments and ruled they must pay out.
Ms Hadley added: “I was hoping the verdict was going to be before Christmas because it was so stressful thinking about how much we badly needed the festive trade to give us a good chance of surviving.
“All through this, we have had this insurance policy that wasn’t paying out… I was devastated by that.
“It’s what insurance is for. The sector says it runs on the “principles of utmost good faith” but it didn’t feel like that it was.
Pre-covid The Velvet Music Rooms and Sugar Suite was a hugely popular independent nightspot for Broad Street revellers. It re-opened on July 10 after the first lockdown, but closed again during the November lockdown and – like other hospitality businesses – has remained shut ever since.
The night-time sector, in particular, has been badly hit by the pandemic – with little financial help from the government.
Ms Hadley said: “As one of the very few independent bars in the city centre, we are really looking forward to opening our doors once more to our loyal and fantastic customers.
“Broad Street has taken a battering in 2020 but I feel very positive that the area will come back bigger and better than ever. “
The court ruling could result in tens of thousands of businesses receiving pay-outs which could total hundreds of millions of pounds across the UK.
Huw Evans, director-general of the Association of British Insurers, said: “All valid claims will be settled as soon as possible and in many cases, the process of settling claims has begun.”
One of the judges in the ruling said the insurers’ arguments for non-payment seemed to him “clearly contrary to the spirit and intent of the relevant provisions of the policies in issue”.
Lord Briggs added: “This was not, of course, a disease which anyone could have had specifically in mind when the policies in issue were written and marketed. But it is clear from the use of the definition of a ‘notifiable disease’ in most of the relevant clauses, and equivalent wording in the remainder, that Covid-19 [when it appeared] fell squarely within the types of disease for which all the relevant disease and hybrid clauses provided cover.”