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High Court Verdict in the FCA’s ‘Business Interruption’ test case

On 15th September the high court gave its judgement in the FCA’s test case involving business interruption claims as a result of COVID-19. The high court found in favour of the FCA, who were acting on behalf of policyholders.

Christopher Woolard, Interim Chief Executive of the FCA, commented:

‘We brought the test case in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims and the wider market. We are pleased that the Court has substantially found in favour of the arguments we presented on the majority of the key issues. Today’s judgment is a significant step in resolving the uncertainty being faced by policyholders. We are grateful to the court for delivering the judgment quickly and the speed with which it was reached reflects well on all parties.

‘Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful.

‘Insurers should reflect on the clarity provided here and, irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgment says should be paid. They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.

‘If any parties do appeal the judgment, we would expect that to be done in as rapid a manner as possible in line with the agreement that we made with insurers at the start of this process. As we have recognised from the start of this case, thousands of small firms and potentially hundreds of thousands of jobs are relying on this.’

The overall aim of the test case was to clarify the correct interpretation in the policy wordings of many insurers as quickly as possible. Some insurers had rejected business interruption claims from policyholders involving the closure of their business as a result of the pandemic. The process started with the FCA selecting a ‘sample’ of policy wordings from 8 insurers, hence the ‘test case’. It was estimated that a possible 370,000 policyholders could be affected by the outcome of this case.

It is likely that this judgment will be appealed, however this does not prevent policyholders looking to settle claims with their insurers prior to any potential appeal outcome.

We understand that many clients will be keen to find out how this may effect them and their policies however it is important to note that the vast majority of business insurance policies focus on property damage within the business interruption sections and therefore this weeks news will not affect the majority of policyholders. Affected policyholders should expect to hear from their insurers within the next seven days.

If you have any questions about the FCA test case, the court judgement, or what it means for you or your policies, please contact the office on 0114 268 4606 and speak to your usual contact.

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