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Covid-19 Business Interruption Insurance: The High Court's Guidance in the FCA Test case
The High Court has today handed down its judgment in the Financial Conduct Authority's ("FCA's") test case to determine the issues of principle in relation to policy coverage under various specimen wordings underwritten by various underwriters in respect of claims by policyholders to be indemnified for business interruption losses arising in the context of the COVID-19 pandemic and the advice of and restrictions imposed by the UK government in consequence.
21 "lead" policies were considered from 8 insurers. In addition the FCA estimated that some 700 types of policies across 60 different insurers and 370,000 policyholders could potentially be affected by the test case. The Court divided the lead policies into essentially three categories:
- What the FCA termed "Disease Clauses", which involved construing a number of wordings which contain non-damage "extensions" to the "standard" Business Interruption ("BI") cover provided by the relevant insurers. That "standard cover" is contingent on the occurrence of physical or material damage to the insured premises.
- What have been referred to as "Hybrid Clauses", which involved policy terms which referred both to restrictions imposed on the premises and to the occurrence or manifestation of a notifiable disease", and
- Clauses covering prevention of access and similar perils, which involved a number of the wordings which provide cover where there has been a prevention or hindrance of access to or use of the premises as a consequence of government or local authority action or restriction.
