The High Court has found in favour of policyholders in respect of a large proportion of the arguments put forward in the FCA test case.
Proceedings were issued in June 2020 by the FCA seeking clarity on the policy wording of eight insurers, amounting to a total of 21 lead policies, covering business interruption insurance in the context of the Covid-19 pandemic.
The court focussed upon the construction of specific non-damage extensions to consider whether insurers should indemnify policyholders who had suffered losses as a result of their businesses being interrupted by Covid-19.
Issues considered by the High Court included:
- The extent to which notifiable disease extensions contained within business interruption policy extensions were applicable
- The extent and application of ‘denial of access’ clauses in the applicable insurance policy extensions.
Whilst full consideration of the long and detailed judgment is currently underway, some of the key positive outcomes for policyholders are as follows:
- Most disease and hybrid clauses should provide an indemnity in respect of business interruption losses caused by Covid-19
- Certain denial of access clauses will also provide coverage
- The Covid-19 pandemic, and the steps taken by the government in respect of the lockdowns imposed, amount to one event causing loss to policyholders.
This is very welcome news for policyholders, although there is a strong possibility that the insurers will appeal.
Nevertheless, each policy will need to be carefully considered alongside the judgment to ascertain its impact upon individual policy wording. According to the FCA, policyholders should be contacted by their insurer within the next seven days.
The FCA estimates that, in addition to the particular policies chosen for the test case, some 700 types of policies across over 60 different insurers and 370,000 policyholders could potentially be affected by the test case.