Supreme Court Judgment in the FCA Business Interruption Insurance Test Case Handed Down

Colin Edelman QC appeared on behalf of the FCA, leading Peter Ratcliffe and Adam Kramer of 3VB and Max Evans of Fountain Court.

The test case focused on the application of Denial of Access and Notifiable Disease extensions to pandemic related losses.

The Supreme Court has dismissed all of the insurers’ appeals and substantially allowed the FCA’s appeals on behalf of policyholders. Many thousands of policyholders will now have their claims for coronavirus-related business interruption losses paid.

The judgment establishes a substantial degree of cover under policies with notifiable disease clauses and under policies with clauses triggered by prevention of access to or restrictions on the use of premises.

Insurers relied heavily on a previous judgment from 2010 called 'Orient Express' in their submissions on causation. The Supreme Court has ruled that the case was wrongly decided. This has wider implications beyond the pandemic in that business interruption policies are now more likely to respond to other types of 'wide area damage' such as storms or floods.

The FCA has published draft guidance for policyholders on how to prove the presence of coronavirus, which is a condition in certain types of policy. The consultation closes on 18 January, but the FCA is extending the closing date to 22 January only for any supplemental comments arising from the judgment. The FCA will issue finalised guidance as soon as possible after that. 

You can find a copy of the judgment here

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