The Supreme Court has delivered Judgment in the high-profile test case brought by the FCA regarding business interruption insurance. It will be of great interest (and relief) to many businesses affected by the pandemic.
The pandemic and its associated restrictions have led to widespread disruption to businesses, many of whom have been unable to operate at all for significant periods of time.

Many have turned to their business interruption insurance policies for assistance – after all, if a nationwide lockdown caused by a pandemic doesn’t fall under the head of “business interruption”, what does?
As always, things are not so simple.  Policies differ in their wording and many discovered that their insurers would not accept claims as the scope of the policy was unclear, or did not extend to these circumstances.
The Test Case
Owing to this uncertainty and the vast number of businesses wishing to make claims (many of whom had complained to the FOS), the FCA agreed to bring a test case.  It recognised the broad range of wording used in popular policies and accepted there is genuine doubt over interpretation.
Without clarity, disputes would increase alongside the number of rejected claims. In May 2020, 370,000 policy holders were identified as being potentially affected. A selection of 21 popular policies from leading insurers would be used as examples to be reviewed by the Courts.
The FCA recognised that absolute clarity was unlikely to be achieved.  Instead, the case would focus on key contractual provisions and uncertainties that were identified as the main causes of uncertainty.
Key Issues
In very broad terms, there were two main issues in dispute:

  • Coverage
Many insurers believed that policies which operated without the need for physical damage to property did not cover losses resulting from the pandemic.

  • Causation
Many insurers also disputed that the link between claim made under the policy and the loss suffered was sufficiently established.
The First Hearing
The first hearing took place at the High Court, with Judgment handed down in September 2020.
It is a complex and lengthy Judgment which was generally favourable to policy-holders, establishing that:

  • Most “notifiable disease” clauses, where outbreaks occurred within a specific radius from the property, provided cover and were not limited to losses resulting from local outbreaks
  • Some “denial of access clauses”, covering losses arising from an inability to access/use premises due to restrictions, provided cover
  • The pandemic and the restrictions in response were, broadly, a single cause of the covered loss (in many cases allowing adjustments to profit figures to establish loss)
Not all insurers were found liable across all sample policies.  Each claim may need to be considered against the Judgment, in the event of a rejected claim, to establish whether the law provides support.
The Appeal
The Supreme Court granted permission to appeal to both the FCA and six insurers on various points from the High Court Judgment.

On 15 January 2021, the Supreme Court Judgment was published, and it allowed the appeal of several points raised by the FCA. A press release was published which can be viewed in full here which reads:
“The Supreme Court has substantially allowed the FCA’s appeal on behalf of policyholders. This completes the legal process for impacted policies and means that many thousands of policyholders will now have their claims for coronavirus-related business interruption losses paid.”
The Judgment is complex and runs to 112 pages, but the Supreme Court dismissed appeals regarding 11 policies from six insurers.  This decision now paves the way for many claims to be renewed or issued successfully by businesses.
What Next?
The FCA has promised to “work with insurers so that they rapidly conclude their claims processes on claims that the Supreme Court has said should be paid, providing interim payments wherever possible”.
The definition of “rapidly” in this context will be very different from that desired by businesses and individuals who need assistance sooner rather than later.  Cashflow issues for many businesses will continue to worsen whilst the latest lockdown continues, potentially for several months.
The crucial point is that businesses with insurance policies who have not already claimed should consider doing so. Those that have been unsuccessful (or with claims/complaints in abeyance) may now see their odds of successfully claiming greatly improved and should review their policies, seeking advice where there is uncertainty.