FCA: Covid-19 Test Case

The High Court has handed down its judgement in the FCA’s business interruption test case.

The judgement has clarified a number of issues and points of law that have been in dispute following the blanket refusal of most insurers to deal with business interruption claims resulting from Covid-19 and the UK wide lockdown.

The FCA sought to establish liability under a representative sample of policy wordings from a number of insurers. The FCA accepted that business interruption covers in general only respond to damage caused  by an insured peril (such as fire), but noted that some policies contain free standing, non-damage related extensions of cover for business interruption, such as infectious or notifiable diseases (disease clauses) and denial of access or public authority closure or restriction clauses (denial of access clauses). They argued that these clauses in the sample wordings presented to the High Court provided cover in the circumstances of the Covid-19 pandemic.

Following the judgement the FCA advised “The judgment says that most, but not all, of the disease clauses in the sample provide cover.  It also says that certain denial of access clauses in the sample provide cover, but this depends on the detailed wording of the clause and how the business was affected by the Government response to the pandemic, including for example whether the business was subject to a mandatory closure order and whether the business was ordered to close completely.”

It is important to note that it does not mean cover will apply in every circumstance or under every policy.

Indeed the judgement is complex and it will require time for its findings to be assessed and reviewed properly, however, we do expect to start hearing from insurers within the next 7 days to understand how it will affect our clients.

Click here to read the full FCA statement

This article was published on 17.09.2020

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