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On the 15th January 2021, the Supreme Court handed down their judgement in relation to the application of specific business interruption clauses and the question of whether these clauses respond (or not) to Covid-19 losses.

Whilst all parties are still reviewing the full judgement and how it applies to every affected customer, we must be mindful of the fact that different insurer wordings and the individual circumstances of each claim will require further assessment on their own merits, which may result in different outcomes.

In the judgement the Supreme Court substantially allowed the FCA’s four appeals brought on behalf of policyholders and dismissed the insurers’ appeals. Click here to see the FCA’s press release and here to see the Table of High Court and Supreme Court outcomes by policy type.

The decision goes some way to providing certainty on the nature and scope of cover provided under the sample policies analysed in the test case and it also provides clarity on the application of trends clauses.

This judgment does not, and indeed was not intended to provide all the answers to policy coverage for all COVID-19 BI claims and that there will likely be more debate on the subject to come.

Arlington will continue to closely monitor the situation and provide updates as they are released. If in the meantime you wish to discuss this matter or notify us of a potential claim for your insurers consideration please do not hesitate to contact us.

Why was there a need for a test case and what was the purpose?

In some instances, there were doubts over the appropriate interpretation of the insurers wordings which led to uncertainty and disputes, with many policyholders having what they believe to be valid claims rejected by their insurer.

The intention was to try and help resolve some of the legal uncertainties around business interruption (BI) insurance policy coverage and how various BI policies respond to COVID-19 related claims.

For a more detailed history click here to see out previous Blog on the “test case” published in July.

What was the test case intended to achieve?

That for those eight insurers involved in the test case the decision would be legally binding and in addition, that it would provide persuasive guidance for the interpretation of similar policy wordings and claims that could be considered in other court cases, even if on a different wording.

What did the judgment decide?

As was expected the judgement is highly complex and will take time for all parties involved to fully review it. Only eight insurers’ policy wordings were selected for review and the policy wordings were not specific Real Estate wordings.

At Arlington, we have written to the insurers that we trade with and asked them to confirm their position following this judgement, with particular focus on their Denial of Access cover, and, the Actions of Competent Authorities clause.

In the meantime there have been a number of statements and press releases : –

Financial Conduct Authority (FCA)

“The judgment is complex, runs to over 150 pages and deals with many issues.” “Insurers should reflect on the clarity provided here and, irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgment says should be paid.  They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.” The FCA’s legal team at Herbert Smith Freehills have published a summary on their website, which may be referred to for further detail. Click here for the full FCA press release.

Also following the judgment from the High Court, the FCA have issued a Dear CEO letter outlining their expectations of insurers following the judgment.

Association of British Insurers (ABI)

“This is a complex judgment spanning 162 pages and 19 policy wordings and it will take a little time for those involved in the court case to understand what it means and consider any appeals. Individual insurers will be analysing the judgment, engaging with the regulator, taking account of the appeal process and keeping their customers informed in the period ahead.” Click here for the full article.

British Insurance Brokers’ Association (BIBA)

“This was a complex situation requiring legal consideration of the many different issues of proximate causation and wording interpretations. It was pleasing that the ruling provided clarification on some key issues….” and they went on to say – “We recognise how important this case is for customers and the insurance industry alike and we will study the judgement in detail over the coming days while waiting to see if any of the parties appeal.” BIBA has been working with the law firm Weightmans and their insight on the judgement can been found here.

What happens now?

It could be said that this is really just the beginning, not the end, of the whole issue for everyone involved, who now have to establish what the decision actually means.

The FCA have already indicated that the parties have discussed the possibility of an expedited appeal, which could move straight to the Supreme Court, and a consequentials hearing (submissions from the parties on the appropriate declarations to be made by the court and on any applications for appeal) is set for the 2nd October to allow permission applications to be heard. What remains to be seen is the extent of any appeal and the issues to be considered in further detail.

Arlington will continue to closely monitor the situation and provide updates as they are released. If in the meantime you wish to discuss this matter please do not hesitate to contact us.

The Financial Conduct Authority (FCA) says the keenly anticipated judgement in the COVID-19 business interruption test case will be handed down next week and will be published on the FCA’s website on September 15th at 10.30am

The High Court hearings were held over eight days in July, ending with submissions made by the FCA, Hospitality Insurance Group Action, Hiscox Action Group and eight insurers who agreed to be part of the case.

The insurers involved are Arch, Argenta Syndicate Management, Ecclesiastical Insurance Office, Hiscox, MS Amlin, QBE, Royal & SunAlliance and Zurich.

The court will also decide whether an appeal will be allowed.