27 October 2020
Over the summer, the Financial Conduct Authority (FCA) brought a landmark test case in the High Court seeking declarations designed to resolve uncertainty around the status of insurance claims for lost revenue flowing from the pandemic and the consequent lockdown.
The test case was brought following the insurance market’s response to reject claims for business interruption losses suffered (predominantly by SMEs) as a result of the pandemic and the UK government’s response to it (ie the nationwide lockdown).
The FCA stepped into the shoes of business interruption policyholders and brought the first ever High Court test case under the Financial Markets Test Case Scheme against eight insurers – including Hiscox, RSA, QBE and Zurich – seeking certain declarations on the interpretation of policy wordings for business interruption cover. The FCA said these wordings had enough ambiguity to warrant clarification from the court to provide certainty on how insurers should handle claims.
Business interruption insurance traditionally covers loss of revenue or profits suffered from physical damage to property such as following a fire or a flood. Some policies, however, contain extensions for non-damage to property cover known as notifiable disease, prevention of access, and actions by a competent authority extensions. These were the wordings tested by the court following insurers’ rejections of claims under this type of cover in respect of pandemic losses.
We've been closely involved in this process, reviewing hundreds of business interruption policies and claims in our role as adviser to UK Hospitality to determine the impact of the test case on its members. We're also acting for other policyholders in separate litigation (across a range of sectors) on business interruption claims.
Find out more about the judgment (and how we can help you) here. For a table setting out the results (pending appeal to the Supreme Court) of the court's findings, based on the representative sample wording, see below.
We have updated our FCA test case table of results following the Supreme Court's judgment handed down on 15 January 2021. The FCA has also published a policy checker and FAQ document which policy holders should consult. Each policy wording needs to be carefully reviewed against the judgment and advice should be sought where appropriate from your broker or legal adviser.
by multiple authors