Business Interruption Insurance and COVID-19

Answers to 10 key questions following the High Court test case

1. What is the High Court test case?Following the COVID-19 pandemic and the subsequent lockdown, many businesses called on their insurance to cover the consequential interruption to their business (“BI Insurance”). Given the significant number of potential claims, insurers were understandably reluctant to pay out, with insurers seeking to rely, in some cases, on very narrow or vague policy wording to support their position.

This led to disputes with many insurers who have, in many instances, declined to cover claims. In response to numerous complaints by policy holders, the Financial Conduct Authority (“FCA”) asked the High Court to make a ruling on how a representative sample of BI Insurance policies respond to COVID-19 related losses. The hearing took place in July 2020 and heard from representatives for the FCA (on behalf of policy holders) and various insurers. The Court was asked to consider 21 different policies, considered to be broadly representative of those in use.

The Judgment was handed down on 15 September, with the High Court finding in favour of the FCA (and therefore the policy holders) on the majority of the key issues. This is generally good news for policy holders, who may now be able to proceed with their claims. The claim triggers under many “disease” and “hybrid” clauses, and certain “denial of access/public authority” clauses, as well as others, were found to have been engaged, which means that those policies should have responded. However, the Judgment did not say that all eight insurers are liable across all of the 21 different types of policy wording considered. Each policy needs to be considered against the Judgment to work out what it means for that policy.

2. Which insurance companies/policies were considered by the High Court? Eight insurers (Arch, Argenta, Ecclesiastical, Hiscox, MS Almin, QBE, RSA and Zurich) agreed to participate in the case. The High Court considered the sample policies across those insurers, which contained the types of clauses that policy holders have claimed under, such as non-damage business interruption and denial/prevention of access. However, the FCA has estimated that around 700 types of policies could be affected by the case, across more than 50 insurance companies.

3. What if my policy wasn't analysed by the Court - what should I do?Your policy could still be affected by the High Court decision even if it wasn't part of the test case. Those policies were chosen as samples and the principles of the High Court decision will need to be considered against each policy and the particular facts of each case.

4. I've already raised this issue with my insurer and they have refused to make any payment. Many insurers have declined claims for COVID-19 business interruption. Some of those decisions were correct and will remain correct. However, the High Court ruling means that some of those decisions were wrong and insurers will need to reconsider. In this scenario, policy holders are not prevented from making a further claim, in light of the High Court decision.

5. I've already raised this issue with my broker and they have told me that I don't have a claim. Brokers, like insurers, have made decisions and given advice on the basis of their interpretation of insurance policies. The High Court has now given guidance which indicates that some of those interpretations and decisions were wrong, and some policies should respond to the claims. If you fall into this scenario, you are not prevented from now engaging with your insurer to ascertain whether your policy covers you.

6. If my policy is included in the Judgment, what should I do?If your specific policy wording was considered in the test case, the High Court has now given a clear indication as to how your claim should be considered and dealt with by your insurer. The FCA guidance indicates that insurers should contact affected customers within seven days of the Judgment, but it is unclear whether this requirement applies to all insurers or only those who were part of the test case, only to the specific policy wording considered by the High Court and only to those customers who had made a claim which had been refused. If you have a claim, however, and have not been contacted by your insurer within seven days, you are still able to pursue your claim.

7. How should the value of my claim be calculated? The Judgment does not determine how much is payable under individual policies, but provides much of the basis for doing so (by way of example, by comparing the actual performance of the business with that which the business would have achieved in the absence of the COVID-19 outbreak). Each claim will need to be considered alongside the policy and the Judgment to ascertain any sum due to the policyholder. Detailed financial information may be required.

8. How long will this take? Some or all of the insurers may seek to appeal the decision, although they have already agreed that any appeals will be expedited. In the meantime, insurers are able to deal with and settle claims that are presented if they choose to do so. Professional support in presenting claims can speed up the process and mean recoveries are made as soon as possible.

9. Is there a time limit for me to bring a claim? Each insurance policy will contain rules about time limits in which to notify insurers about a claim. Do not delay if you think you have a valid claim.

10. Who should I talk to? We are able to review your policy and the circumstances of your claim and to advise whether you are likely to have a claim that your insurer should accept. We can also help present your claim, including the value of your claim and in the presentation of financial evidence, with a view to aiding a swift resolution.

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If you would like to talk through the consequences for your business, please email us and one of our team will get in touch.