COVID-19 Business Interruption Insurance Test Case Judgement

26 Jan

On Friday 15th January 2021, the Supreme Court handed down its judgement on the business interruption (BI) test case, appealed from a 15th September 2020 High Court judgement following expedited proceedings. The FCA have written to insurers outlining their expectations and next steps on 22nd January 2021.

Representing the interests of policy holders, the test case was brought by the Financial Conduct Authority (FCA), the conduct regulator for financial services firms, against eight insurers who agreed to participate in the test case.

The aim of the test case was to provide clarity on the proper operation of cover under certain non-damage business interruption (BI) insurance extensions and to avoid individual policyholders having to pursue expensive, individual action. Whilst the wait for the decision has been frustrating, the insurance industry has had to wait for the conclusion of these legal proceedings before being able to consider claims further and update policyholders on their specific claims.

It remains the case that the vast majority of BI policy wordings are clear and did not provide cover for COVID-19 (or its consequences) nor intend to provide this cover in any way, with policy coverage focused on losses as a result of physical damage at your property such as a fire or flood.

What You Need to Know

What happens if you have already submitted a claim within the scope of the test case (non-damage BI extensions)?

Insurers who participated in the FCA’s test case are expected to contact every client that had made a claim for business interruption due to COVID-19 and inform them whether a decision on their claim would be affected by the Supreme Court’s ruling, even if a decision had already been made.

Thomas Carroll will be contacting all our clients who have submitted ‘in-scope’ claims, to let them know that we are speaking to their insurers and will get back to them as soon as possible.

We want all valid claims to be settled without delay by insurers, however, if you have an ‘in-scope’ claim, please be aware that more claims assessment and/or adjusting may be required prior to final settlement.

What happens if you have submitted a claim and the policy wording is not the same or similar to those examined in the test case and was declined?

Insurers are required to review their policy wordings in light of the judgment. If these are materially the same as the wordings that have been ruled to provide cover, they will need to pay claims accordingly.

For most claims previously defined as ‘out of scope’, it is anticipated that cover will still NOT apply.

We are in discussion with all insurers where we have notified ‘out-of-scope’ claims to determine if there are any changes to this decision following this test case.

What do you do if you have yet to submit a claim?

There is nothing to stop you from submitting a claim for COVID-19 related losses to your business.

We can provide guidance as to our interpretation of your policy coverage and give a view as to whether we think it is likely to be covered or not. We can submit a claim to your insurers, if you wish to do so.

Is COVID-19 and its consequences now excluded from your policy?

Most insurers have already moved to clarify their policy wordings and exclude any potential COVID-19 related cover, particularly in their property and business interruption wordings.

Depending on when your policy falls due for renewal, relevant exclusions are likely to be in place already. If in doubt, please contact your Thomas Carroll Executive.

What is the position regarding any liability claim you may receive from employees or members of the public related to COVID-19?

Please submit any potential claim for either employer’s liability or public liability to us for review as soon as possible. Do not enter into any correspondence with a claimant, as this may prejudice your policy’s position.

We will review any claims in the context of your policy’s coverage and advise you accordingly.

What Happens Next?

The Supreme Court is working with insurers, the FCA and other parties, to enable the Court to issue its declarations in the light of the test case judgment. This will summarise the various complex elements of the judgement for the policy wordings considered by the Supreme Court.

The FCA will publish a set of Q&As which will assist in understanding the complexities of the test case judgement.

The judgement considers 21 lead sample policy wordings, from eight insurers. The FCA, working with insurers, will be publishing an updated list of policy types that could potentially respond to COVID-19 BI non-damage claims, once insurers have quickly reviewed their policy wordings in view of the Court declarations.

How Are We Helping You?

We understand this is an extremely difficult time. The FCA test case will be welcome news for some and disappointing for others.

There are a number of actions we are taking at Thomas Carroll:

  • For those who have a valid claim that has not yet been settled, we will continue to push those insurers to assess and pay the claim promptly.
  • Once the FCA publicise the updated list of policies which could potentially provide policy cover, we will align these to any policy we have arranged for our clients and will make contact with you as promptly as possible, to discuss any potential claim.

We want to reassure our clients that we are working tirelessly on your behalf.

If you are affected, we will contact you in the weeks that follow. In the meantime, if you have any further questions, please don’t hesitate to contact us on 02920 853788 or at