Yesterday the High Court gave judgment in a test case to determine whether businesses can receive a payout under their Business Interruption Cover. This article covers the verdict.

The test case run by the High Court should resolve the uncertainty faced by thousands of businesses that have suffered financial losses as a result of the Coronavirus pandemic.

What was the test case for?

The case was brought to the High Court by the Financial Conduct Authority (FCA) against eight insurers to decide whether businesses that have suffered financial loss as a result of the Coronavirus pandemic could receive a payout under their Business Interruption Cover.

The Court was asked to consider 21 different types of insurance policy wording used by the insurers in relation to ‘diseases’, ‘prevention of access’, and ‘public authority’.

What did the Court decide?

The Court found in favour of the majority of the arguments advanced by the FCA and the Court’s decision will provide much needed clarity and certainty for businesses.

The key elements of the judgment are:

  • The test case has removed the need for businesses to resolve a number of the key issues individually with their insurers. The judgement and guidance provided by the Court means that it will be much easier for businesses to navigate claims against their policies and to have a better understanding as to whether the claim will be successful at the outset;
  • The FCA estimates that some 700 types of policies could be affected by the test case;
  • The test case was not intended to deal with all possible disputes. The FCA’s aim was to resolve contractual uncertainties and causation issues so as to provide clarity for policyholders and insurers. The judgment does not determine how much is payable under individual policies, but rather will clarify the basis for bringing a claim;
  • Whilst the Court did find in favour of the majority of the FCA’s arguments it did not say that the eight insurers are liable across all of the 21 different types of policy wording. Each policy needs to be considered against the detailed judgment to work out what it means for that policy;
  • The Court considered the case authority of Orient Express Hotels Ltd v Assicurazioni Generali SpA [2010] EWHC 1186 (Comm) as it was heavily relied upon by the defendant insurers in their submissions on causation. The Court distinguished this case and commented that it had been wrongly decided and that it would not be followed;
  • The defendant insurers may decide to appeal the decision. Given the importance of the judgment the FCA and the defendant insurers have agreed to expedite any appeal; which may result in the case being referred directly to the Supreme Court.

If you would like more information on Business Interruption Cover and insurance policies, please get in touch and one of our experts will happily assist you.