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Update: Commercial Court – Business Interruption insurance test case

The Financial Conduct Authority (“FCA”) issued legal proceedings on 10 June 2020 against a number of leading UK insurers which will lead to a test case in the Commercial Court concerning Business Interruption (“BI”) insurance policy wording and coverage.

Arguments over BI coverage (or the lack thereof) have been widespread since the outbreak of the coronavirus pandemic, which has seen an across the board shutdown of many business sectors in the UK. Thousands of businesses now have severe cash flow problems. Many have already entered into formal insolvency arrangements. The retail, travel and leisure industries have been particularly hard hit with little to suggest that their positions will improve any time soon.

In April 2020, the FCA wrote to a large number of insurance companies seeking clarification about whether they are declining or intend to decline BI insurance claims. Based on the information obtained from this exercise, the FCA issued legal proceedings in the Commercial Court on 10 June 2020 which will seek declarations as to the scope of cover under the relevant business interruption policy conditions. The defendant insurers have now filed and served their Defences to the FCA’s Particulars of Claim raising a variety of defences some of which are more attractive than others.

Judgment is expected to be handed down in early August 2020 after an 8-day trial before Lord Justice Flaux and Mr Justice Butcher later this month.

Clarke Willmott is handling a number of high value claims against several of the insurers targeted by the FCA’s legal action. We welcome and strongly support the FCA’s move on behalf of our clients and will be watching matters closely.

Christopher Woolard, Interim Chief Executive at the FCA said:

“The court action we are taking is aimed at providing clarity and certainty for everyone involved in these BI disputes, policyholder and insurer alike. We feel it is also the quickest route to this clarity and by covering multiple policies and insurers, it will also be of most use across the market. The identification of a representative sample of policies and the agreement of insurers who underwrite them to participate in these proceedings is a major step forward in progressing the matter to court.”

The following insurers will have their policy wordings examined by the Commercial Court;

  •  Allianz Insurance plc
  • American International Group UK Limited
  • Arch Insurance (UK) Limited
  • Argenta Syndicate Management Limited
  • Aspen Insurance UK Limited
  • Aviva Insurance Limited
  • AXA Insurance UK plc
  • Chubb European Group SE
  • Ecclesiastical Insurance Office plc
  • Hiscox Insurance Company Limited
  • Liberty Mutual Insurance Europe SE
  • MS Amlin Underwriting Limited
  • Protector Insurance UK
  • QBE UK Limited
  • Royal & Sun Alliance Insurance plc
  • Zurich Insurance plc

Policyholders should not assume that inclusion of their policy wording in this case will mean their policies will provide them with cover. The FCA is seeking a judgment that will help policyholders and insurers have a much clearer view of which BI policies respond to the COVID-19 pandemic and those that don’t.

Many businesses across the UK, particularly in the leisure, hospitality and retail sectors, will anxiously await the outcome of this process. The Commercial Court’s ruling is expected to supply much wanted guidance to both insureds and insurers alike concerning policy coverage.

For further information about business interruption insurance claims, please contact Richard Moore.


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