UK High Court backs BI insurance policyholders in landmark case


Business interruption (BI) insurance policyholders affected by Covid-19 have been given a significant boost after the UK High Court found in favour of the Financial Conduct Authority’s (FCA) argument with insurers over highly contested policy wordings.

The judges’ findings provide clarity around key disputed clauses and are expected to prompt the settlement of many BI claims in the aftermath of significant losses suffered as a direct consequence of the pandemic.

It is estimated that 700 different policies offered by 60 insurers to some 370,000 policyholders will be impacted by the findings of the test case.

What was the case against insurers?

The FCA, the insurance industry regulator, brought the test case to the High Court after a number of insurers denied liability for BI claims based on their interpretation of policy coverage and causation.

The FCA represented the interests of policyholders, many of whom are small and medium sized business that have suffered devastating financial losses as a consequence of Covid-19.

Seeking clarification on specific clauses, the FCA argued that the pandemic and the Government’s response should trigger BI pay-outs for impacted policyholders.

Eight insurance companies took part in the test case.

What policy wording was considered by the judges?

The test case reviewed 21 sample wordings from standard business interruption policies offered by the eight different insurers. The sample policy wordings fell into three separate categories: disease wordings (cover for notifiable disease), prevention of access / public authority wordings (cover for denial of access to the premises) and hybrid wordings (cover for restrictions on the premises resulting from a notifiable disease).  

The judges were asked to consider whether the ‘disease’ and/or ‘denial of access’ clauses in the sample wording cover policyholders for losses suffered as a result of the pandemic.

How did the judges rule on business interruption policy wordings?

The judges determined that most, although not all, of the disease policy wordings provide cover for policyholders.

Importantly, they resolved that Covid-19, the Government and public response were a sole cause of business interruption. Even where a policy provides cover, claims must meet this condition before a settlement can be reached.

The judges also addressed the denial of access clauses, pointing out that cover would depend on the specific wording of each clause and how the Government’s response had impacted the individual business.

How does the ruling impact BI policyholders?

The judges’ ruling provides certainty around specific policy wordings in the context of the Covid-19 pandemic. It does not however provide a solution for all claim disputes; each policy must still be reviewed against the court’s detailed findings.

It does means that policyholders no longer need to engage with their insurer on key areas of uncertainty around policy wording and causation. Policyholders with affected claims can expect to be contacted by their insurer over the next week.

Will insurers appeal the UK High Court’s decision?

The insurers may choose to appeal the judge’s findings and have agreed alongside the FCA that any appeal should be fast tracked to provide a prompt resolution for policyholders.

An appeal does not prevent policyholders from pursuing a claim settlement with their insurers.

What should I do if I think I have a claim?

If your business has suffered a loss as a result of the Covid-19 pandemic, find out if you have a claim under your BI insurance policy. Get in touch with our team today to have us review your policy terms for free.

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