FCA Business Interruption Test Case – the judgment

The FCA has this morning published the judgment in the High Court test case. They have also issued a press release on the judgment.

The judgment runs to over 150 pages and will take a little time for all parties to review, but the court has, broadly speaking, agreed that a number of policies do provide cover for business interruption losses as a result of COVID-19.

Both insurers and the FCA will now review the judgment, and if any of the parties to the case determine that there are aspects of the judgment they wish to appeal, they will seek permission to do so from the court.  Should an appeal take place, the position on the cover available under a policy including any existing claims will remain unchanged by the judgment until that appeal process has concluded.

The FCA has said that every policyholder who has made a claim or complaint that is potentially affected by the judgment should receive an update from their insurer within 7 days.  The communication at the moment is likely to be simply that the insurer is reviewing things and will be in touch.

Whilst the headlines are talking about a victory for the FCA, the ABI has said ‘The judgment divides evenly between insurers and policyholders on the main issues’. Statements from various industry bodies are below:

Association of British Insurers (ABI)

“Insurers have supported this fast-track court process led by the FCA to help bring clarity for customers and we welcome the speed with which the court has delivered a ruling. The judgment divides evenly between insurers and policyholders on the main issues. The national lockdown was an unprecedented situation that posed understandable questions of interpretation for some business insurance contracts.

“Insurers always regret any contract dispute with their customers and will continue to reflect on feedback from recent events. We recognise this continues to be a difficult time for many businesses, small and large, and for society as a whole. That is why insurers have made a range of commitments to help both businesses and individual customers through the crisis and why the industry expects to pay out over £1.7bn in Covid-19 claims.

“This is a complex judgment spanning 162 pages and 19 policy wordings and it will take a little time for those involved in the court case to understand what it means and consider any appeals. Individual insurers will be analysing the judgment, engaging with the regulator, taking account of the appeal process and keeping their customers informed in the period ahead.”

British Insurance Brokers Association (BIBA)

“Covid-19 and the application of insurance in relation to Business Interruption insurance created a complex situation requiring legal consideration of the many different issues of proximate causation and wording interpretations. That is why, from the outset, we welcomed the FCA intervention in bringing this test case and the ultimate clarity the judgment will bring (once any appeal process is complete).

“We recognise how important this case is for customers and the insurance industry alike and we will study the judgment in detail over the coming days while waiting to see if any of the parties appeal.

“Meanwhile, the outcomes do not prevent individual policyholders from pursuing issues through the courts, or eligible complainants from taking a complaint to the Financial Ombudsman Service.”

Financial Conduct Authority (FCA)

“We brought the test case in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims and the wider market.  We are pleased that the Court has substantially found in favour of the arguments we presented on the majority of the key issues. Today’s judgment is a significant step in resolving the uncertainty being faced by policyholders. We are grateful to the court for delivering the judgment quickly and the speed with which it was reached reflects well on all parties.

“Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful.

“Insurers should reflect on the clarity provided here and, irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgment says should be paid.  They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.

“If any parties do appeal the judgment, we would expect that to be done in as rapid a manner as possible in line with the agreement that we made with insurers at the start of this process. As we have recognised from the start of this case, thousands of small firms and potentially hundreds of thousands of jobs are relying on this.”

FCA Test Case High Court Judgment Review Webinar

Friday 18 September, 10:00am.

Join us for an interactive webinar where we will answer these questions in our review of the FCA test case High Court Judgement.

  • What is the background to the case?
  • What has been decided?
  • What are the next steps?

Register for the webinar