Today marks the start of the highly anticipated Supreme Court hearing in a test case brought by the Financial Conduct Authority (FCA) against eight insurers for Business Interruption insurance.
At the start of the coronavirus pandemic, the vast majority of insurers who provided disease and non-damage extensions to their business interruption wordings denied claims submitted in relation to COVID-19 under these extensions. However, following expedited proceedings brought by the FCA under the Test Case regime to the High Court, the court rejected the causation arguments raised collectively by insurers and found largely in favour of policyholders in relation to the sample wordings it considered.
Whilst it was hoped that the parties would be able to reach agreement so that certainty could be achieved and an appeal would not be necessary, this did not occur. Six out of eight of the insurers who were involved in the test case were given permission to leapfrog appeal to the Supreme Court, bypassing the Court of Appeal, with only RSA dropping its appeal in relation to its RSA4 (Marsh/Resilience) Wording. The FCA has also appealed in respect of two of the policy types where the High Court found against the policyholders (QBE 2 and 3) and in relation to the more restrictive interpretations of some of the denial of access and hybrid wordings (i.e. those which contain cover for prevention of access and disease).
Insurers and policyholders will be closely watching the outcome of this case. Whilst there will be no further legal avenues to pursue after the Supreme Court judgment on the issues involved in the appeal, there could be scope to argue other allied points, which have not been considered as part of the test case. Should the Supreme Court largely follow the decision of the High Court, then this is likely to pave the way for policyholders to argue what are known as aggregation points under their policies. Aggregation, simply put how many occurrences there are under a policy, is a very fact specific and complex area. However, it will provide fertile territory for policyholders to argue that they have incurred several different occurrences of loss under their policies, leading in principle to multiple claims per policy and thereby considerably upping the potential bill for insurers.
The thousands of businesses with disease or non-damage denial of access wordings in their policies should take immediate action if they have not already done so to review their policy and take all necessary steps to maintain and pursue their claim. Great care should be taken to ensure that policy conditions in relation to notification and provision of information are met to avoid alternative arguments to deny coverage.