Business Interruption Test Case Decision

The High Court yesterday handed down its judgment on the test cases brought by the Financial Conduct Authority (FCA) in relation to business interruption policies and claims made under the same in relation to losses suffered as a result of the national lockdown in March, and ongoing restrictions for businesses.

On most key issues, the Court found in favour of the policyholders, which will be a relief for many small businesses across the country. The devil is in the detail on these policies though, and the 162-page judgement went into great detail on all points raised, and will no doubt take some time for all parties to digest.

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.”

Background refresher

The Covid 19 pandemic, and the whole country lockdown in March, led to widespread disruption and caused financial difficulties for many businesses. Businesses looked to their business disruption insurers to make payments to cover these losses.

Business interruption policies are complex. There were genuine difficulties in interpretations of policy clauses leaving customers in doubt whether they could make claims at all, and decisions taken by different insurers was causing uncertainty and dispute. The FCA took the decision that these matters needed to be resolved as soon as possible and asked the Courts to consider several policy wordings to provide clarity and certainty for everyone involved in business interruption insurance claims because of Covid 19.

On 9th June 2020, the FCA test case in relation to business interruption insurance policies was issued in the High Court. The FCA took a representative sample of cases to Court, covering 17 policy wordings, with insurers having volunteered to take part.

The trial commenced on 20th July and lasted eight days, with Mr Justice Flaux and Mr Justice Burcher presiding over the case.


It is highly likely that there will be appeals against the judgement which may not be back before the Court until early 2021, although it is expected that this will be accelerated, and may even seek to leapfrog the Court of Appeal and go straight to the Supreme Court. Many insurers may take the decision to attempt to resolve cases with their policyholders to move matters forward.

Affiniti will be interested to see what happens next .

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