Business interruption insurance test case: a Supreme outcome for policyholders

On 15 January 2021, the Supreme Court handed down a landmark judgment which will have an immediate impact on many businesses affected by the Covid-19 pandemic, along with longer term effects for the analysis of insurance claims for years to come.

The pandemic caused many charities to locate and read their insurance policies, in particular any business interruption provisions. It had been thought, however, that standard property business interruption insurance policies were very unlikely to have been triggered by the coronavirus crisis.

The FCA last year commenced a test case to clarify the situation, in relation to 21 policy wordings considered to be representative of the “non-damage” business interruption (BI) extensions which are believed to affect 60 insurers, 700 policies and around 370,000 policyholders.

A trial was held in July 2020 and on 15 September 2020, the High Court handed down its judgment, finding largely in favour of the FCA. The insurers and the FCA appealed.

In the recent Supreme Court decision, all of the insurers’ appeals were unanimously rejected.

The Court’s decision is a comprehensive outcome for the FCA and affected policyholders. Many policyholders whose claims have been rejected will now benefit from cover. The majority will find that the extent of cover will have been increased as a result of the judgment.

For a consideration of the key points from the judgment, read our article.

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