The COVID-19 pandemic has led to widespread closures and disruption to businesses around the world. Whilst the construction industry and its supply chain have remained active, it has not been immune to this upheaval. It has been estimated that the impact of the COVID-19 pandemic is causing productivity losses of around 15% on UK construction sites leading to project delays and a surge in disputes.
Contractual uncertainty: the verdict on business interruption
In relation to these challenges, over the past six months, the courts have sought to provide legal clarity on the meaning and effect of certain business interruption (BI) insurance policies2 by way of a test case brought by the Financial Conduct Authority (on behalf of UK based small/medium businesses). The purpose of this has been to resolve contractual uncertainty around insurance claims related to the COVID-19 pandemic and define the validity of claims brought under BI insurance policies. On 15 January 20213, the Supreme Court found (largely) in favour of the businesses who will now be eligible for insurance pay-outs to cover business losses sustained because of the pandemic. The total value of such claims is estimated to be in the billions.
How is this relevant to the construction industry?
This ruling provides a timely reminder of the principles which need to be applied to properly demonstrate the effect of COVID-19 as a precursor to a successful claim for relief.