FCA's business interruption insurance test case

On 15 September, the High Court handed down its judgment in the FCA test case and provided welcome clarity on a number of uncertainties around business interruption claims. While the court has reached nuanced conclusions, specific to each representative sample policy wording, it has agreed with the FCA on the majority of the key issues.

The court determined the outbreak of COVID-19 was the “occurrence” of a notifiable disease for the purposes of that cover where there were diagnosable cases in the relevant geographical area under the policy. Furthermore, cover was not limited to outbreaks within the geographical radius.

The court, however, took a more conservative view on the prevention of access/competent authority cover, which is commonly taken out by hospitality businesses. The court found cover in some wordings but, in general, losses claimed under this clause will require a detailed review of the policy wording against the judicial guidance to establish precisely where cover applies.

On the key question of causation, the court determined that the pandemic and Government’s response to it were a single cause of the covered loss for the purposes of establishing the quantum of claims. This will be significant when determining pay outs under the relevant policies.

We have been closely involved in the process, reviewing hundreds of business interruption policies and claims in our role as adviser to UK Hospitality, as well as acting for other policyholders in separate litigation across a range of sectors.

In this webinar from 23 September, Katie Chandler and Julian Randall analyse the FCA test case judgment including how the court determined cover, in principle, under the three categories in question (disease wordings, prevention of access/Public Authority wordings, and hybrid wordings), and provide guidance on what this judgment means for policyholders.