Business Interruption Insurance Litigation

Publication Date16 October 2020
SubjectInsurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Trials & Appeals & Compensation
Law FirmRollits LLP
AuthorMr Andrew Digwood

Final clarity still awaited in Business Interruption Insurance litigation as insurers may yet appeal to the Supreme Court

A test case brought to the High Court earlier this year by the Financial Conduct Authority in support of a number of Policyholder Action Groups representing small and medium-sized businesses, which was intended to establish the extent of cover provided to businesses under 21 different sample Business Interruption Insurance policies in light of the Covid19 crisis could yet be heading to the Supreme Court in a "leapfrog" appeal directly from the High Court's decision.

The High Court ruled that many (though not all) of the 21 sample clauses through their "disease" and "denial of access" provisions for "non-damage" loss DID provide cover - although much turned on the interpretation in detail of the precise wording of the clauses in question, and the particular impacts suffered by insured businesses. The Court also held that the pandemic and the government's response to it were a single cause of loss for the purposes of establishing a claim, which perhaps was helpful to insured businesses who might otherwise have been confronted with a degree of "hair-splitting" from their insurers when claims of this sort were made.

The case had been brought by the FCA on behalf of SME business owners, following concerns that it expressed as far back as April that many Business Interruption policies may not provide cover to businesses affected by the pandemic, the lockdown etc., and that many others contained ambiguities likely to lead to insurers seeking to deny such cover.

A range of arguments were in issue between the FCA and insurers, chiefly centred around questions of causation and the locality or otherwise of outbreaks of Covid19 to the insured business - in very simplified terms the extent to which a loss caused to a business by a national outbreak of disease (or indeed by how the government chooses to respond to that outbreak) can be covered by a policies which, some insurers argued, were only intended to be triggered by localised outbreaks of notifiable diseases more directly affecting the locality of the insured business. The High Court, however, recognised the exceptional nationwide nature of the Covid19 pandemic and the response of government to it.

The interim Chief Executive of the FCA, Christopher Woolard welcomed the...

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