UPDATE on FCA v Insurers – Business Interruption test case relative to COVID-19 exposure

We want to keep you informed as to what’s currently happening in the test case heard by the High Court in June/July 2020 and subsequently by the Supreme Court in November 2020 between the Financial Conduct Authority (FCA) and several insurers and a selection of their policy wordings.

The test case reviewed and challenged a representative sample of 22 policies with 8 insurers.  All the policies had some ambiguity in the wording that allowed it to be challenged by the FCA.

The High Court has now handed down its judgment, and the judgment broadly found in favour of the FCA arguments on behalf of policyholders. A number of points were appealed to The Supreme Court and the judgement was issued on 15 January 2021, the judgement is a complex document running to 112 pages.

It’s important to remember that only those insurance policies where there was ambiguity in wordings and/or clause interpretation that have been challenged.  And even with a positive judgement, the vast majority of policies are clear on their intent and interpretation, and do not provide any cover for a ‘global pandemic’ situation.

What happens next?  

We are currently reviewing the judgement and once we are clear on it’s interpretation we will contact customers who are directly affected.

As the test case was based on a sample of wordings, there is a requirement for all insurers in the UK (not just those involved in the test case) to review their BI wordings in light of the judgment – specifically around the interpretation of some of the key clauses within their wordings.

The FCA has a dedicated web page which you can visit https://www.fca.org.uk/firms/business-interruption-insurance#latest-updates

The JM Glendinning Team