FCA Business Interruption Test Case – COVID-19

On 15 September, the High Court handed down its judgment in the Financial Conduct Authority’s (FCA) business interruption test case. While different conclusions were reached in respect of each wording, the Court has found in favour of policyholders on the majority of the key issues arising out of the wordings considered in the representative sample.

A statement from the FCA about the case outcome, together with summary of the key points of the decision can be found on the FCA’s website. It is widely expected (but yet to be confirmed) that aspects of the ruling may be appealed. If there is an appeal, it is expected that, in the interests of time, this will bypass the Court of Appeal and go straight to the Supreme Court. The judgment is technical and complex, running to well over 100 pages, and deals with many nuanced issues.

Key points to note are:

  1. As a general point, non-damage extensions to business interruption policies can respond to COVID-19 related BI losses. However, assessing whether or not there is cover under a particular wording will be complex, and involve particular evaluation of precise words used and the exact factual circumstances causing loss as they applied to the policyholder’s business during lockdown.

  2. Broadly speaking, the Court found that the wording of the majority of notifiable diseases extensions that it considered in the test case do provide cover.

  3. The position with non-damage denial of access extensions is more complex. There may be cover, but this will depend on the exact factual circumstances applying to the policyholder’s business during lockdown, and the precise wording used in the policy. 4. Generally, insurers may not rely on narrow interpretations of causation to reduce amounts recoverable under policies where cover is triggered. If your insurer wrote to you before the test case to advise you that your claim was potentially affected by the test case, then the FCA has asked that they communicate with you within seven days of the Court’s judgement.

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