FCA Test Case Claims for Business Interruption Insurance

You may have seen in the press that the Financial Conduct Authority (FCA) brought a test case against a group of eight UK insurance businesses to legally determine whether or not these insurers should pay out for Business Interruption claims. The judge delivered the ruling on this landmark test case on Tuesday 15^th September, and the High Court found in favour of the arguments advanced for policyholders by the FCA on the majority of the key issues.

What does this mean for you?

This has been a complex case: the judgement runs to over 150 pages. Whilst the High Court’s initial ruling may appear to have been in favour of policyholders, it makes clear that each policy needs to be considered against the detailed court judgement to work out what it means for that policy. They have commented that this could affect 700 types of policies involving up to 60 insurers. It is likely that claims will be considered depending on the detailed wording of the clause and how the business was affected by the government response to the pandemic, including, for example, whether the business was subject to a mandatory closure order and whether the business was ordered to close completely or only partially.

What should I do next?

There is nothing that you need do at present. Insurers have been instructed to contact brokers and policyholders with affected claims within the next seven days, however it is likely that the judgement will go to appeal, which may further delay proceedings.

Does this affect other cover within my policy(s)?

Your other current insurance covers will not be affected by this judgement, although premiums could rise as a result of substantial pay-outs that insurers may have to make as a result of this ruling.

We know this continues to be a difficult time for many of our clients and are committed to doing all we can to support you and your business. We will let you know as soon as we hear any more, and should your policy be affected, your insurance contacts at Scrutton Bland will support you through the claims process and answer any questions you may have just as soon as they become available from insurers and ultimately help with swift payments of valid claims.

A more detailed explanation of the High Court ruling can be found on the FCA page here.