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Update: Judgment handed down in FCA’s business interruption test case

The Commercial Court (the “Court”) has handed down judgment in the COVID-19 business interruption insurance test case involving eight of the UK’s largest insurers.

The Court found in favour of the FCA on the majority of the key issues, in particular in respect of coverage triggers under most disease and mixed clauses, certain denial of access / public authority clauses, as well as causation and so-called trends clauses. The judgment will be welcome news for a significant number of the thousands of policyholders impacted by business interruption losses as a result of COVID-19 who have been denied cover.

In order to establish liability under the representative sample of policy wordings examined by the Court, the FCA argued that disease and/or denial of access clauses in the representative sample of policy wordings provide cover in the circumstances of the COVID-19 pandemic. The outbreak of the COVID-19 pandemic acted as the trigger for cover in relation to policyholders’ losses.

The judgment says that most, but not all, of the disease clauses in the twenty-one policy wordings provided cover. It also says that certain denial of access clauses in the sample provide cover. However, this depends on the detailed wording of the clause and how the business was affected by the Government response to the pandemic, including for example whether the business was subject to a mandatory closure order and if the business was ordered to close completely.

The judgment runs to over 150 pages and we will analyse the impact of the judgment in detail and its impact on policy holders shortly.

The policy wordings in question were taken from policies issued by the following insurers:

  • Argenta Syndicate Management Limited
  • Ecclesiastical Insurance Office Plc
  • Hiscox Insurance Company Limited
  • MS Amlin Underwriting Limited
  • Arch Insurance (UK) Limited
  • QBE UK Limited
  • Royal & Sun Alliance Insurance Plc
  • Zurich Insurance Plc

The most immediate question is whether or not the defendant insurers will appeal the judgment of the Court and, if so, in what, manner.

However, the decision provides little hope for those stuck with classic property damage only cover who are very likely to remain disappointed.

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