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Policyholders and insurers await highly anticipated English Supreme Court decision to cover COVID-19 loss of business interruption



On Tuesday, the English Supreme Court will announce its long-awaited decision in "test cases" to cover business interruption losses during the COVID-19 pandemic under sample policy. Regardless of the outcome, the London court ruling promises to be a significant development for UK insurance markets, as billions of pounds in potential insurance claims are at stake – and – in addition – policyholders and / or insurance companies can be expected to claim one or the other of their support. positions for interpreting similar policy language in future cases of COVID-19 business interruptions.

FCA test case

In the first action of its kind since the agency was founded in 201

3, the UK Market Conduct Authority (FCA) designed the test case process earlier this year to seek legal clarity on insurance companies' obligations to cover business interruption claims. with the ongoing COVID-19 pandemic. Introduced by the English Supreme Court (a court of law in the United Kingdom), the FCA test case involves approximately 370,000 policyholders and eight insurance companies. The case was heard by Judge Christopher Butcher, who is sitting in the Commercial Court, and Judge Julian Flaux from the Court of Appeal. Experienced English adviser prepared and presented arguments to the court for prompt consideration and resolution. The FCA hired a law firm to instruct well-known lawyers from the Devereux Chambers and the Fountain Court Chambers; the insurers hired their own lawyers and attorneys.

These are 17 examples of policy phrases. In particular, the FCA test case focuses on two coverage extensions related to: (1) denial of access to insured property, or (2) claims where a notifiable illness has occurred within or within a specified radius of the insured property. The wording and issues addressed in the FCA test case do not require physical loss or damage to the insured sites as a prerequisite for establishing coverage.

During the eight – day hearings held in July, the FCA argued for coverage and argued, including that neither the total closure of the premises nor complete physical barriers were required to trigger coverage. The Swedish Competition Authority claimed that the government's blocking restrictions triggered coverage according to the wording of the example policy because the restrictions prevented companies from functioning as usual. According to the FCA, coverage applies if the business interruption was caused by COVID-19 more generally, and not just by a case of COVID-19 within a certain distance from the insured premises.

On the other hand, the insurance companies argued in part that only a complete cessation or obstruction of access to the policyholder's business triggers coverage. According to the insurers, it is not enough to follow only advice or guidance from the government that was not mandatory to trigger coverage according to the example in the wording. In addition, the insurance companies claimed that the government's guidance and legislation caused the loss of business interruptions nationwide, which distinguishes the cause from locally proven cases of COVID-19 that are within a certain radius for each insured place as required by the example. 19659002] The potential impact of the Supreme Court's decision

The Supreme Court's decision will only bind the eight insurers mentioned in the case in respect of similar policy formulations regulated by British law. It is not intended to cover all possible British business interruption disputes with similar policy formulations, nor is it intended to determine how much, provided the court enforces cover, the insurers are actually liable for specific claims under the wordings in question.

Whether there is coverage for a particular business interruption due to COVID-19 depends, as always, on the information about the policyholder's facts, specific policy language and applicable law in the applicable jurisdiction. In this regard, as mentioned above, it is worth noting that the FCA test case did not address insurance formulations that require "physical loss or damage" to insured property and similar formulations that (as we have discussed in previous posts) U.S. insurers cite in their efforts to exclude coverage.

In any case, the High Court's ruling is unlikely to be the last word in the UK, as the parties have stated that they intend to appeal any negative conclusions quickly. . Look for our analysis of the FCA decision issued at 10.30 BST on 15 September 2020.


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