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FCA High Court Test Case: Response of non-damage business interruption extensions to COVID-19 losses

The judgment in the FCA Business Interruption Test Case has been published. The full judgment together with a copy of the FCA’s press release is available here.

The key message from the FCA is that the Court found in favour of the arguments advanced for policyholders by the FCA on the majority of the key issues under consideration. It will become clear in due course whether any party will seek to appeal any aspect of the judgment.

The key takeaways for policyholders are as follows:

  1. The Court has found that the non-damage business interruption extensions it reviewed are capable of being triggered in the context of a global pandemic such as COVID-19.
  2. As regards the majority (albeit not all) of the Notifiable Disease extensions under consideration, the Court found that cover would be available for losses caused by the wider COVID-19 pandemic.
  3. As regards the Non-Damage Denial of Access extensions under consideration, whilst cover is capable of being triggered, the extent of cover available will turn on the precise terms of the policy and how the business was affected by the Government response to COVID-19.
  4. In general terms the Court did not find favour with narrow arguments around causation advanced by insurers, instead agreeing with the FCA’s approach to policy interpretation, causation and the calculation of recoverable loss.

Next Steps

As always, we work with the best interests of our clients in mind. The judgment is lengthy and complex. It deals with general principles as well as each of the 21 policy wordings under consideration and will not have identical ramifications for each client or each claim. Not all policies will respond to COVID-19 BI losses, notwithstanding the detail of the judgment.  Please bear with FCA whilst they work through the implications of the decision and commentary set out in the judgment.

Note that the FCA has required that insurers contact impacted policyholders in the next 7 days.

Webinar Invitation

For a general overview of the decision and its likely impact on outstanding Business Interruption claims, please join us for an FCA Test Case Webinar at 10.00am on 23 September 2020.

Please click here to save the date.