Travel agents say a positive outcome to an insurance test case is “critical” for the survival of small businesses struggling due to the Covid-19 pandemic.

This week’s Supreme Court case could trigger claims for ‘significant’ sums of money by travel agencies unable to trade during Covid-19, say agency groups.

Agencies were among 370,000 firms to make claims on their business interruption insurance after being forced to close or facing significant losses as a result of the pandemic. Insurers disputed the claims, which could total as much as £1.2 billion collectively, arguing their policies were never meant to cover such unprecedented restrictions.

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Agents said the result of this week’s case, which follows a High Court case that mostly ruled in favour of the insurers, was vital for many battling to stay afloat in the current crisis.

An Abta spokesperson said: “Some of our members have raised with us that they have not received payouts as they expected under their business interruption insurance – it is a critical issue for those businesses.”

Advantage Travel Partnership leisure director Kelly Cookes said: “We are hoping for some positive news. For those members who could benefit, this could be a significant sum of money that affects how long they trade.”

Westoe Travel director Graeme Brett said his insurance claim was rejected despite having specifically taken out a “five-star policy” which included business interruption cover.

He said: “We expected that insurance to kick into place for loss of income but our claim was rejected because our policy didn’t specifically mention Covid.”

Bailey’s Travel owner Chris Bailey said the Supreme Court case was the “last chance saloon” for agents hoping for insurance pay-outs after having to shut shop for large chunks of 2020.

He said: “If it goes against us we’re up the creek without a paddle. Having said that, I’m reasonably confident that, in the absence of any new compelling evidence, the Supreme Court will most likely support the decision of the High Court.”

The High Court looked at 21 policy types as part of a test case brought by the Financial Conduct Authority, and rulings on 13 have been appealed against.

High Court judges found mostly in favour of insurers having to pay out to policyholders regarding a selection of policy types. Some are currently being appealed against at the Supreme Court.

Supreme Court judges will make a final judgement, which is expected to come some weeks after this week’s hearing.

MoreInterview: ‘Insurers have lessons to learn from Covid crisis’ [Oct 20]