Judgment in the FCA Business Interruption Test Case

The COVID-19 pandemic has caused widespread disruption and, with it, uncertainty as to whether businesses are entitled to claim under their business interruption insurance policies.

Many policies specifically cover losses caused by notifiable and/or infectious diseases. Alternatively, denial of access provisions might be triggered if you were compelled to close your business as result of the lockdown. Nevertheless, some insurers have rejected claims on the basis that business would have been interrupted in any event as result of the Government’s lockdown restrictions rather than COVID-19. The position was even less clear cut if your policy does not specifically refer to such matters.

To resolve key points of uncertainty, the FCA brought a test case on behalf of policyholders against eight insurers involving the consideration of twenty one representative samples of policy wording. The court has now given much needed guidance on the application of these policies, finding in favour of the policyholders’ interpretation on the majority of issues. The FCA has made it clear that it expects insurers to now take steps to progress claims which the court has indicated should be paid. It remains to be seen whether the insurers will appeal the decision, but this is good news for businesses which have been affected by the pandemic.

If your insurer has rejected your claim, we can advise you on your options. Please contact Elizabeth Asher or Alexander Weinberg for further information.

The information in this article was prepared on 28 September 2020. The law and practice is currently changing daily, so please check the up to date position before acting on anything you read here.