Business interruption insurance test case: welcome news for policyholders

Overall, the case was a welcome decision in favour of policyholders and businesses, with the Court finding in their favour on many key points. However, the Court did not find that all of the insurers involved are liable across all of the limited sample policies that it considered. Any policies that were not considered therefore need to be considered against the judgment. Whilst the test case has clarified several key questions which will assist policyholders to overcome hurdles when making an insurance claim for business interruption, it is clear that not every policy will cover the Covid-19 pandemic. The FCA have confirmed that affected policyholders should receive an update from their insurers within the next week.

The Court's decision has ramifications beyond those who were a party to the action. At least some of the participating insurers have already asked for more time to submit an application for permission to appeal, with the possibility of a leapfrog appeal directly to the Supreme Court. Despite this, we hope that insurers generally will be prompted by the judgment to settle some claims before any appeal is determined, which is likely not to be until 2021.

The comfort for some businesses will therefore, unfortunately, be short-lived. Despite being in a precarious position since March, businesses will no doubt be frustrated that uncertainty remains.

Businesses would be well advised to keep up to date with the FCA test case developments and contact us for advice as soon as possible with any questions about how the decision impacts them or to review their BII policy wording should a claim be rejected. We can offer a cost effective fixed fee review.