Covid-19 BI claims update: Are furlough payments a BI loss?
Covid-BI related litigation continues to rumble on as the six-year limitation period for filing new claims draws closer.
Limitation is due to expire for the majority of claims in England in March 2026 and the industry is predicting a last-minute surge of claims, following a rise in claims in Q1 of 2025.
Protective proceedings or standstill agreements may need to be relied upon if claims settlements cannot be reached quickly and/or claims handling capacity once more becomes an issue.
Judicial rulings on furlough deducations
In the meantime, in Bath Racecourse Company Ltd v Liberty Mutual Insurance Europe SE & Anors, the Supreme Court granted policyholders permission to appeal the question of how furlough payments should be treated.
This issue has been the subject of intense debate for the past five years and thus far the insurers’ approach of deducting furlough payments from claims payments has been approved by the Commercial Court and Court of Appeal.
The Court of Appeal ruled “…insureds did not have to bear the expenses of the wages bill and to that extent, the charges or expenses of the business were reduced.”
Market impact
The furlough scheme is understood to have cost the Treasury approximately £70bn and was critical in keeping businesses afloat as the country grappled with restrictions.
Considered a matter of market-wide importance, any change in approach by the Supreme Court will have huge consequences for the industry.
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