A critical deadline is rapidly approaching that threatens to nullify thousands of unresolved business interruption claims stemming from the Covid-19 pandemic, potentially leaving a vast number of businesses without the compensation they have sought for over five years. With an estimated 370,000 policies initially thought to be eligible for payouts, the stark reality is that insurers have accepted fewer than 50,000, creating a significant gap and mounting pressure on the UK’s financial regulator. This looming cutoff has prompted a coalition of legal experts and industry advocates to issue an urgent plea for intervention, warning that inaction could trigger a wave of protective litigation that would overwhelm the court system and unfairly penalize businesses, particularly small and medium-sized enterprises still recovering from the economic fallout of government-mandated lockdowns. The central issue is a six-year statutory limitation period, which for most claims will expire in March 2026, forcing a critical decision point for policyholders and the Financial Conduct Authority (FCA).
A Ticking Clock for Thousands of Businesses
In a formal open letter to the Financial Conduct Authority, a powerful coalition has articulated the severe risks facing a substantial portion of the UK business community. This group, which includes the prominent disputes firm Stewarts alongside hospitality trade organizations representing a collective of over 155,000 businesses, highlighted the impending March 2026 expiration of the six-year limitation period for insurance claims in England and Wales. This deadline applies to a majority of the business interruption claims filed in the wake of the pandemic. The letter underscores a dramatic disparity in claim resolutions, noting that while an estimated 370,000 policies could potentially lead to compensation, insurers have acknowledged and paid out on fewer than 50,000. This leaves a staggering number of businesses, many within the hard-hit hospitality sector, in a state of limbo more than five years after government-mandated closures crippled their operations, a situation the coalition argues is untenable and requires immediate regulatory action to prevent widespread financial injustice.
The consensus among industry experts, including brokers and claims advisers, is that without a formal extension from the regulator, the consequences could be severe and far-reaching for all parties involved. The primary concern is that thousands of policyholders with legitimate but unresolved disputes will be left with no alternative but to initiate legal proceedings against their insurers. This would not be a strategic choice but a defensive necessity to preserve their legal right to a claim before it becomes time-barred. The signatories of the letter to the FCA warn that this scenario would inevitably trigger a massive surge in litigation, placing an unprecedented and potentially unmanageable strain on already burdened court resources. Furthermore, such a development would disproportionately harm the very small and medium-sized enterprises that have struggled most, as many lack the financial capacity to fund protracted legal action after enduring years of claim delays and sustained economic hardship, effectively shutting them out of the justice system.
The Legal Labyrinth of Unresolved Claims
A central pillar of the argument for an extension rests on the significant evolution of the legal landscape surrounding business interruption claims since the pandemic began. Aaron le Marquer, head of policyholder disputes at Stewarts, has emphasized that five years of intensive test case litigation have methodically dismantled many of the initial grounds on which insurers denied claims. A series of landmark court decisions has now established that a multitude of claims once dismissed by insurers are, in fact, valid and payable under the terms of the policies. The coalition contends that the current March 2026 deadline does not provide sufficient time for these crucial legal precedents to be properly analyzed and applied to the vast backlog of unresolved cases. Forcing businesses to either accept inadequate settlements or launch costly litigation before these complex legal questions are fully settled would undermine the very purpose of the test case process, which was intended to bring clarity and fairness to the claims resolution process for all.
Further complicating the timeline are two major unresolved legal issues that have a direct and substantial impact on the value of thousands of claims, making a deadline extension essential for fair outcomes. The first is a pivotal Supreme Court hearing scheduled for February 2026, which will deliver a final verdict on whether insurers were legally entitled to deduct government furlough payments from business interruption payouts. The coalition is demanding that insurers be bound by this decision for all claims, irrespective of whether a claim would have otherwise expired by the March deadline. The second issue stems from recent Court of Appeal guidance on the interpretation of “any one loss” policy limits, particularly for businesses operating across multiple locations. This guidance has profoundly altered how claim values are calculated and has reset many settlement negotiations, requiring significant time to work through its complex implications and ensure policyholders receive the full compensation they are due.
A Call for Regulatory Intervention
The proposed solution, as detailed in the open letter, was a direct and time-sensitive request for the Financial Conduct Authority to intervene decisively. The coalition called for the regulator to issue new, binding guidance to all relevant insurers by January 20, 2026. At the heart of this proposal was the requirement that insurers agree to treat all valid claims as payable for an additional two years beyond the statutory March 2026 deadline. This extension was framed not as a delay but as a necessary measure to ensure procedural fairness. It was argued that this additional time would provide the critical breathing room needed to absorb the outcomes of the key legal questions still before the courts, most notably the Supreme Court’s impending decision on furlough payments. This proactive step, the signatories believed, would ultimately ensure that businesses received fair and accurate compensation based on the most current legal precedents, all while averting the imminent threat of a deluge of premature and resource-intensive litigation.
