Supreme Court Judgment rules in favour of FCA's Business Interruption Insurance Test Case
The Supreme Court delivered its judgment in the FCA’s Business Interruption Insurance Test Case on 15 January 2021. This has been welcomed as a lifeline for small business, which will unlock claims for hundreds of thousands of firms worth an estimated £1.2 billion.
The insurance industry will consider the decision to be a catastrophic outcome, and one which may have significant consequences for future policies.
Background
The FCA’s case sought clarity as to how business interruption insurance policies should treat policy holders as a consequence of the COVID19 interruptions in the last 12 months.
The insurers involved in the FCA test case included Hiscox Insurance Company Limited, Royal and Sun Alliance Insurance plc and Zurich Insurance plc.
At first instance in the High Court on 15 September 2020, a decision largely favoured the FCA’s interpretation of how business interruption policy should be addressed as valid claims. On appeal to the Supreme Court, it has substantially followed those findings and completes the legal process for all material policies.
In practical terms, this means that many thousands of policy holders will now have their claims for coronavirus related business interruption losses paid.
Most SME policies are focused on property damage and only have some basic cover for business interruption, flowing from physical damage to that property. However, some policies also cover business interruption from other causes in particular infectious or notifiable diseases, or clauses in relation to access being prevented to the premises, or as a consequence of any public authority closures or restrictions.
The test case has therefore brought urgently required clarity to the key issues following a representative sample of 21 types of insurance policies, issued by 8 insurers being considered. It was identified that 370,000 policy holders held up to 700 types of policy, issued by a total of 60 insurers that may be affected by the outcome of the test case.
In general terms, we advise all clients with policies to contact their brokers and/or review their existing commercial policies of insurance to see whether they can benefit from the test case. It is however hoped, that policy holders with claims, can expect to hear from their insurers soon
In addition, you may wish to consider the FCA website (www.FCA.org.uk) as to any general questions you may have and guidance generally.
Pressure will be placed upon the insurers to process any material claims, including the payment of interim payments wherever possible.
Please do not hesitate to contact the Litigation Team at Kingsfords Solicitors via Daniel Crook (dbc@kingsfords.net), Thomas Browne (tnb@kingsfords.net) and Graeme Weir (gjw@kingsfords.net) to assist as to whether or not your business may be able to rely upon the test case and seek to secure a payment under your insurance policy.