The lockdown measures have generally been stricter in Scotland than in the other quarters of the UK; and Scots have had to wait longer for any meaningful relaxation of the relevant rules and guidance.
What impact has this had on those who have experienced business interruption in Scotland?
The Knock-on Effect of Lockdown in Scotland
The tougher lockdown regime in Scotland and later easing of measures might have had a yet further adverse impact on those doing business north of the border; particularly given the high test that must be met before a business can maintain any premises or operations in terms of the current Scottish Government guidance.
Although there is now Scottish-specific guidance on restarting or preparing to return to work in different sectors, Scotland remains in the planning stages, or “Phase 1”, of the Scottish Government’s Route Map for Decision Making. As well as general advice for businesses, the Scottish Government has now published specific guidance for businesses and the self-employed across 9 different sectors.
There is therefore a window of opportunity for businesses to plan ahead now for restarting operations in Scotland based upon the Scottish and UK guidance. Caution will be needed however to ensure that any necessary adjustments are made to account for further Scottish-specific rules that might ultimately come into play.
The stricter nature of the Scottish rules, and in particular the high test for maintaining premises or operations to any extent, may also mean that certain business interruption claims are more viable in Scotland.
It has been widely reported that the Financial Conduct Authority (FCA) has urged SMEs to join its test case which will challenge the decisions by certain insurers to turn down business interruption claims. The FCA is seeking a High Court ruling in July 2020 to help businesses and insurers get clarity on what policies should respond and those that should not.
Although the FCA is the conduct regulator for financial services firms and markets through the UK, including insurance providers who write business in Scotland, the High Court only has authority to deal with cases which can legitimately be raised in England & Wales. This means that the FCA’s test case could be restricted to examining the success of business interruption claims which have been made under the UK regime (i.e. as it applies in England & Wales); perhaps not taking account of the stricter measures applied in Scotland.
This could mean that any decision in the FCA test case is of limited relevance in Scotland, particularly where business interruption policies provide for cover that is engaged by a government order or similar.
Those affected by business interruption cover in Scotland should consider whether the strict nature of the Scottish regime has an impact on the viability of claims.