Business interruption test case heads to Supreme Court

By James McAllister

- Last updated on GMT

Coronavirus business interruption insurance test case heads to Supreme Court FCA Hiscox, RSA QBE High Court ruling appeal

Related tags Insurance Coronavirus Legal action Supreme Court High court

A landmark test case brought by the Financial Conduct Authority (FCA) against a number of leading insurers over business interruption payouts heads to the Supreme Court today (16 November).

The hearing, which is expected to last four days, will see Supreme Court judges have the final word on whether insurers should pay out on business interruption claims related to the Coronavirus pandemic.

In the wake of the original nationwide Coronavirus lockdown back in March, hundreds of thousands of businesses including restaurants, pubs and bars were forced to close, and subsequently made claims on their business interruption insurance.

However, many insurers have disputed the claims and argued that policies were never meant to cover such unprecedented restrictions.

Eight insurance firms including Hiscox, RSA and QBE were involved in the original test case, which was first announced by the FCA back in June​.

The City regulator has previously said its aim in bringing the test case was to urgently clarify key issues of contractual uncertainty for as many policyholders and insurers as possible.

In September, the High Court ruled that the majority of businesses forced to close in March due to the Coronavirus lockdown are entitled to be compensated​ under their business interruption insurance.

However, many businesses have still not received payouts as a result of the test case being fast-tracked for appeal.

From a sample of 21 policy wordings that the FCA said captured ‘the majority of the key issues that could be in dispute’, the High Court ruled that most, but not all, of the disease clauses provide cover.

The FCA and Hiscox Action Group of policyholders have sought to appeal some aspects of the judgment, as have insurers Arch, Argenta, Hiscox, MS Amlin, RSA and QBE. 

In total, rulings on 13 of those policy types have been appealed against.

The lower court said 11 of the policies should have led to payouts, which are being appealed against by the insurers. The FCA, meanwhile, is appealing the two policies judges ruled should not be paid out. 

Two insurers, Zurich and Ecclesiastical, say the judgement found entirely in their favour and the FCA has decided not to appeal against the findings.

The Supreme Court's decision, which is not expected for some weeks, could affect around 700 types of policies and just under 400,000 policyholders. 

Commenting ahead of today's hearing, Night Time Industries Association CEO Michael Kill said: "The night-time economy and hospitality sector has been decimated by the impact of Covid-19, not least by the behaviour of insurance companies in their management of business interruption claims since the closures of many businesses due to the pandemic"

"We are now at the final hurdle with the FCA Supreme Court appeal hearing this week, and can feel an immense amount of frustration and anger from businesses at the insurance companies that have utilised this process, although expedited, to elongate the potential outcome."

"It has to be said that you can only feel that this strategy by insurers will purposely see many businesses close without seeing their claims fulfilled, bringing into question the integrity of the insurance sector"

The final ruling by the Supreme Court judges will provide a benchmark for the other policies.

The Financial Ombudsman Service and courts in Scotland and Northern Ireland are also expected to use the judgment to rule on other, similar cases.

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