The FCA's BI test case: Table of results

Briefing

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.

Table of results

RSA – Commercial "RSA 3"

Policy: Commercial "RSA 3" (1.3 APR18 Eaton Gate Super Facility Commercial Combined)
BI wording: Notifiable disease
Cover: Cover in principle, from the date when the disease occurred in the relevant 25-mile radius [para.50; Supreme Court]. The disease clause in RSA 3 is properly interpreted as providing cover for business interruption caused by any cases of illness resulting from COVID-19 that occur within a radius of 25 miles of the premises from which the business is carried on. The clause does not cover interruption caused by cases of illness resulting from COVID-19 that occur outside that area [para.74; Supreme Court].
Exclusions: General Exclusion L does not exclude claims arising out of the COVID-19 epidemic [para.79; Supreme Court].
Trends clause: Not enforceable in relation to COVID 19 from date of first occurrence [para.122; High Court].
Types of businesses: Taken out by the owners of a variety of businesses, including building contractors, landscape gardeners and manufacturers and wholesalers of electronics, fabrics and metal goods.

RSA – Combined "RSA 4"

Policy: Combined "RSA 4" (Marsh Material Damage and BI – Resilience; Jelf Material Damage and BI – Resilience)
BI wording: Notifiable disease
Cover: Cover in principle for disease clauses [para.140; High Court], from 31 January 2020 and "enforced closure"/"first denial of access" clause by FCA [para.242 and 299-305; Supreme Court]. Unlikely to be cover for "POA Non-Damage"/"second denial of access" clauses [para.306, 451-455, 468-470; High Court].
Exclusions: None
Trends clause: Not relevant in the context of COVID-19 [para.148; High Court].
Types of businesses: Pubs, restaurant and retail.

Argenta – Argenta 1

Policy: Argenta 1 (Guest House and B&B policy v8 12.19, v7 05.19, v6 02.19, v5 12.18.; Holiday Home and Self-Catering Accommodation policy v7 12.19, v6 05.19, v5 02.19, v4 12.18.)
BI wording: Notifiable disease
Cover: Cover in principle, from the date when COVID-19 occurred within or outside the relevant policy area [para.160; High Court].
Exclusions: Exclusion (iii) excludes liability for premises not within a 25-mile radius of COVID-19 [para.166; High Court].
Trends clause: Not enforceable in relation to COVID-19 from date of first occurrence.
Types of businesses: Guesthouses, holiday homes and self-catering accommodation.

MS Amlin – Commercial "Type 1" and Retail Insured "Type 2"

Policy: Commercial "Type 1" (ADA628-20190601 Commercial Combined (Instant Underwriting)) and Retail Insured "Type 2" (ADA626-20190601 Leisure (Instant Underwriting); ADA627-20191024 Office and surgery (Instant Underwriting); ADA672-20190601 Retail (Instant Underwriting)).
BI wording: Notifiable disease
Cover: Cover in principle; consequential loss following COVID-19 within 25-miles of the premises [para.190; High Court]. Unlikely to be cover for Actions of a Competent Authority (AOCA) clauses [para.306, 419-439; High Court].
Exclusions: None
Trends clause: Not enforceable in relation to COVID-19 from date of first occurrence [para.199; High Court].
Types of businesses: Essential shops, leisure, office and surgery and retail.

QBE – QBE 1, QBE 2 and QBE 3

Policy: QBE 1 (PBCC040120Business Combined; PBCC170619 Business Combined; POFF180120 Office; POFP040120 Office) and QBE 2 (PNML010119 NDML Nightclub and Late - Night Venue Policy; PLSP010119 Leisure Combined Insurance (including PA)) and QBE 3 (PNML010119 NDML Nightclub and Late - Night Venue Policy; PLSP010119 Leisure Combined Insurance (including PA)).
BI wording: Notifiable disease
Cover:
QBE 1 – cover in principle, for the effects of COVID-19 if it manifested within the 25-mile radius [para.86; Supreme Court].
QBE 2 – cover in principle, as this clause limits cover to local cases of COVID-19 [para.235; High Court/para.95; Supreme Court].
QBE 3 – cover in principle; confined to the results of specific (relatively) local cases of COVID-19 within a one-mile radius [para.237; High Court/para.95; Supreme Court].
Exclusions: None that are relevant.
Trends clause: Not enforceable in relation to COVID-19 from date of first occurrence [para. 241; High Court].
Types of businesses: Type 1 – business combined and office; Type 2 – NDML nightclub and late-night venue; Type 2 – commercial combined.

Hiscox – Hiscox 1, Hiscox 2, Hiscox 3 and Hiscox 4

Policy: Hiscox 1 (Professions BI - 16089 WD-PROF-UK-PYI; Retail BI - 16105 WD-RET-UK-PYI; Venues BI - 16110 WD-VEN-UK-PYI
Technology BI - 16101 WD-TEC-UK-PYI; Not for Profit BI - 16097 WD-NFP-UK-PYI; Recruitment BI - 8671 WD-HSP-UK-JMBI, BI- OM (Jelf) - 8671 WD-HSP-UK-JMBI (3) (which are identical); Recruitment BI - 16216 WD-REC-UK-PYI; Trades BI - 16107 WD-TRAD-UK-PYI), Hiscox 2 (Salon BI - 18680 WD-HSP-UK-QHB-PYI; Sports and Leisure BI - 16258 WD-HSP-UK-GEOG-PYI(3); Showtime BI - 11492 WD-HSP-UK-HSH-PYI; Professions BI - 6001 WD-PIP-UK-PYF(9); 15779 WD-HSP-UK-BG-PHAR-PYI(1); Office BI - 15410 WD-HSP-UK-MFL-PYF (1); 16725 WD-HSP-UK-GEO-PYZ(4) (1); Venues BI - 7103 WD-CCP-UK-PVB(2); Venues BI - 7103 WD-VEN-UK-PYZ (3); Charity BI - 9248 WD-CHR-UK-PYL(2); Booksellers BI - 12578 WD-HSP-UK-BSBI(2); Clinic and Surgery BI -16777 WD-HSP-UK-HFC-PYI(1); Office BI - 11335 WD-HSP-UK-MPO-PYI(3); Office BI (Package) - 7620 WD-PIP-UK-POP(3); Property BI - 10199 WD-HSP-UK-INFBI(2); BI -11905 WD-HSP-UK-TBO-BI(1); Opticians BI - 9280 WD-HSP-UK-OPT-PYI(2); Golf - BI - 9102 WD-HSP-UK-GPS-PYI(4); Masonic halls BI - 10883 WD-HSP-UK-MASBI(1); CSA - BI - 13500 WD-HSP-UK-CSA-PYI(1); Sport leisure BI - 11431 WD-HSP-PSS-PYI(10); BI - OM - 13754 WD-HSP-UK-EAPYF(1); Electrical contractors BI - 10117 WD-HSP-UK-JCS-PYI(9)), Hiscox 3 (Gunsmiths BI - 8006 WD-HSP-GUN-PYI; Cleaners BI - 8358 WD-UK-PIP-GCC-PYI; Cricket Club BI - 14174 WD-HSP-UK-CC-PBI(3); Media and entertainment BI - 9519 WD-HSP-UK-AEM-PBI(2); Covernotes BI - 10272 WD-HSP-UK-MUS-PYI(2)), Hiscox 4 (Retail BI-15299 WD-SR-UK-PYI(1); Retail BI-15447 WD-HSP-UK-LFR-PYI(1); Bowling Clubs 15480 WD-HSP-UK-LFB-PYI(1); 20155 WD-HSPX-UK-TIOFAD-PYI(1)).
BI wording: Hybrid; actions of a competent authority.
Cover: Cover in principle in relation to hybrid clauses, as the public authority clause in the Hiscox policies indemnifies the policyholder against the risk of BI due to COVID-19 (in short) [para.243; Supreme Court]. Unlikely to be cover for Non-Damage Denial of Access (NDDA), however [para.306, 390-418; High Court].
Exclusions: None
Trends clause: Enforceable in relation to COVID-19 [para. 275; High Court].
Types of businesses: 65% of the Hiscox insureds who have policies affected by the issues typically comprise small accountancy, consultancy, legal and other similar professional businesses.

RSA – Cottagesure "RSA 1"

Policy: Cottagesure "RSA 1" (S00475G Cottagesure)
BI wording: Hybrid; actions of a competent authority.
Cover: Cover in principle, after 26 March 2020 if there has been a case of COVID-19 within a 25-mile radius which has led to the closure or restrictions on such premises [para. 296; High Court].
Exclusions: None that are relevant.
Trends clause: Not relevant in the context of COVID-19.
Types of businesses: Holiday cottages

Arch – Type 1

Policy: Type 1 (OGI Commercial Combined; OGI Retailers; Powerplace (Offices & Surgeries))
BI wording: Prevention of access
Cover: Cover in principle, after 20 March 2020, due to governmental measures in response to COVID-19 which resulted in preventions of access to the premises [para.306-351; High Court].
Exclusions: None
Trends clause: Not relevant in the context of COVID-19 [para.351; High Court].
Types of businesses: Of the categories of business identified by the FCA, the majority of Arch policyholders fall into Category 3: essential shops including food retailers, pharmacies, petrol stations, banks, medical or other health services (38.4% of Arch policyholders).

EIO – "Type 1.1" and "Type 1.2"

Policy: "Type 1.1" (PD3258 (ME871) Heritage Business and Leisure; Education (ME794); Education (ME868); ME866 Charity and Community; ME867 Faith and Community; ME869 Care; PD3259 (ME872) Heritage Arts and Culture; ME857 Parish Plus; ME858; Parishguard; PD2513 Pound Gates Nursery) and "Type 1.2" (ME886 Nurseries; MGM602 Marsh School and College).
BI wording: Prevention of access
Cover: Unlikely to be cover, with respect to the closure or restriction of use of the premises [para.376; High Court].
Exclusions: None
Trends clause: Yes [para.389; High Court]
Types of businesses: The vast majority of their insureds are in Category 7: churches, charities and educational establishments.

MS Amlin – "MSA 3"

Policy: "MSA 3" (ADA555-20191101 Forge Commercial Combined (with Eastlake & Beachell))
BI wording: Prevention of access
Cover: Unlikely to be cover, as it is intended to serve as a narrow, localised cover; COVID-19 would have to exist in a neighbourhood-like vicinity as opposed to national [para.444; High Court].
Exclusions: None
Trends clause: Not relevant in the context of COVID-19.
Types of businesses: Specialist forge cover is that forges are in Category 5 – businesses about which the advice and the Regulations are silent, and which were never required to close.

RSA – "RSA 2.1" and "RSA 2.2"

Policy: ''RSA 2.1'' (GPUB/PW/06/17 Eaton Gate Super Facility Pubs and Restaurants) and ''RSA 2.2'' (v27.6 APR18 Eaton Gate Super Facility Retail).
BI wording: Prevention of access
Cover: Unlikely to be cover, unless the insured could show governmental advice was due to a local emergency resulting from COVID-19 as opposed to a national one; highly unlikely to be demonstrated in any particular case [para.467; High Court].
Exclusions: Exclusion b) applicable in the context of COVID-19 for the "after effects"; not excluded cover it has just provided [para.462; High Court]. Exclusion e) for RSA 2.2. Losses in excess of £10,000 resulting from COVID-19 are not excluded [para.463; High Court].
Trends clause: Not relevant in the context of COVID-19.
Types of businesses: Pubs, restaurants and retail.

Zurich – "Zurich 1" and "Zurich 2"

Policy: ''Zurich 1'' (Endorsement POA3 to the Combined All Risks Policy ZCYP36) and ''Zurich 2'' (Commercial Combined -Manufacturing (Acturis) SME557; Commercial Combined - Professional and Business Services (Acturis) SME563; Commercial Combined - Sports, leisure and entertainment (Acturis) SME567; Commercial Combined - Wholesale and Retail (Acturis) SME561; Commercial Combined (Acturis) SME500; Contractors Combined SME555).
BI wording: Prevention of access
Cover: Unlikely to be cover, the insured would have to show that regulations were in response to a "vicinity in the sense of a neighbourhood" and not a pandemic [para.501-502; High Court].
Exclusions: None
Trends clause: Not relevant in the context of COVID-19.
Types of businesses: Mainly service businesses and manufacturers, which accounted for 84% of all the Zurich policyholders.