High Court Gives Guidance on UK Business Interruption Insurance

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High Court Gives Guidance on UK Business Interruption Insurance

Key Contact: Hugh Hitchcock

Author: Hannah Jones

On 15 September 2020, the Court delivered the long-awaited judgment in the FCA Test Case litigation concerning COVID-19 Business Interruption claims. The High Court resoundingly found in favour of small-to-medium businesses

The Government’s announcement of COVID-19 emergency measures in March 2020 forced many businesses to close or cease trading, and as a consequence, a flood of financial loss claims followed under their business interruption (“BI”) insurance policies.

Whether various BI polices provided cover to policyholders, was one of the most controversial legal issues resulting from the COVID-19 pandemic.

The widespread concern about the lack of clarity and policyholders who believed they were covered for the pandemic but had their claims rejected by their insurers, saw the Financial Conduct Authority (“FCA”) bring a test case in the High Court in June.

Test Case: The Financial Conduct Authority -v- MS Amlin Underwriting Limited & Others

The FCA reviewed thousands of polices to determine the areas of uncertainty and key questions for the High Court.

Eight insurers (Arch, Argenta, Ecclesiastical, MS Amlin, Hiscox, QBE, RSA and Zurich) agreed to be defendants in the test case and the High Court considered 21 sample BI policies.  

The FCA reported that around 37,000 policyholders could be potentially affected by the test case.


Judgment was handed down on 15 September 2020. It covers a lot of complex issues and runs to over 150 pages.

In summary, the High Court found in favour of the FCA (and therefore policyholders) and that of the test clauses examined:

  • Most – but not all – of the disease clauses in the cross section of BI policies provide cover for losses connected to COVID-19.
  •  Certain denial of access clauses provide cover depending on:
  1. the specific wording of the clause and;
  2. how the business was affected by the Government measures to the pandemic, such as mandatory closure order.

In addition, the test case clarified that the COVID-19 pandemic and the Government and public response were a single cause of the covered loss, which is a key requirement for claims to be paid even if the policy provides cover.

What the judgment means for policyholders

On the face of it the judgment is good news for policyholders, particularly for those whose policies include disease-type clauses.

Insurers have been held to the strict obligations in the policies (and the decision is legally binding on the eight insurer defendants that are parties to the test case) and should pay out in respect of many circumstances where they have previously commonly denied claims. If you have an affected claim, you should receive an update from your insurer in the next seven days

There could still yet be a leapfrog appeal directly to the Supreme Court and each claim needs to be assessed as to whether it meets the policy provisions but we hope that insurers generally will be prompted by the judgment to settle policyholders’ claims without further delay as thousands of small firms and potentially hundreds of thousands of jobs futures rely on this compensation.

Businesses would be well advised to keep up to date with the FCA test case developments. If you have a claim against your insurer under a business interruption insurance policy as a result of COVID-19, then please contact our Litigation Team.

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