The High Court handed down its Judgment on the Financial Conduct Authority (FCA) Business Interruption Test Case on 15 September 2020. The High Court’s ruling on the FCA’s Test Case sought legal clarity on business interruption insurance where there had been ambiguity or confusion regarding a variety of policy wordings.
The ruling was focussed on just 21 sample policy wordings from eight participating insurers. Although the judgment will bring welcome news for many policyholders, the judgment did not say that the eight defendant insurers are liable across all the 21 different types of wordings. While the eight insurers (Lloyd’s of London, Hiscox, Arch, Argenta, MS Amlin, RSA, QBE, Zurich and Ecclesiastical) are certainly among the largest in Europe, the fact remains that most insurers and their BI policy wordings did not form part of the legal action. The vast majority of UK business insurance policies focus on property damage and only have basic business interruption cover. Some policies do extend to interruptions from other causes, such as infectious or notifiable diseases, however many had wordings that clearly excluded COVID-19 and are subsequently unaffected by the Court’s decision. Unfortunately for many businesses, this judgement changes nothing.
Nevertheless, the FCA has said that the Court’s findings, while based on its examination of the sample policy wordings, should be used to interpret the BI policy wordings of other insurers. All eight insurers involved in the test case have the right of appeal.
There is still a lot to be assessed but the insurers have been given 7 days to contact affected policyholders (those that they have already approached regarding submitted, closed or pending claims) to propose the next steps, following this complex judgment.
In respect of any appeals by insurers against the ruling, it has recently been confirmed that the consequentials hearing is taking place on the 2nd October.
If you have any queries regarding the FCA Court Case, the judgment or any implications to your business, please do not hesitate to contact us.