On Friday 15th January 2021, the Supreme Court handed down judgement[1] in relation to the appeal by the FCA and various insurers involved in the original test case brought by the FCA in June 2020, concerning business interruption Covid-19 insurance claims.

The joint judgement of Lord Hamblen and Lord Leggatt (agreed by Lord Reed) was agreed by all members of the Court, with Lord Briggs (agreed by Lord Hodge) disagreeing in two aspects of the reasoning supporting the conclusions.

The judgement is good news for all the businesses affected by the Covid-19 pandemic, who have been relying on being able to make successful claims on their business interruption insurance policies.

The Supreme Court allowed all of the four grounds of appeal from the FCA, although there were qualifications attached to two. Whilst some of the insurer’s arguments on their appeals were accepted the Court confirmed that it did not affect the outcome of the appeal and therefore the insurers’ appeals were all dismissed.  The Court also allowed all three of the Hiscock interveners’ appeals, although two with qualified teams.

In summary the appeals related to the following.

  1. The disease clauses – interpretation

In its judgement the Court rejected the view that the relevant insured “peril” was the disease itself and not a particular outbreak of the disease in any particular place. Emphasis was placed on the fact that any “occurrence” should be something that happens on a particular date and at a particular place, and not being something capable of extending over more than one date.

In the Court’s view a disease which spreads cannot be regarded as something that occurs “at a particular time and place and in a particular way: it occurs at a multiplicity of different times and places and may occur in different ways…”.

With the above view it was determined that disease clauses would generally only cover cases “resulting from COVID-19 that occurs within the 25-mile radius specified in the clause”.  Therefore, cases appearing outside the 25-mile specified radius could not be regarded as being part of the peril insured.

However, because the Court found that such individual occurrences could as a matter of law satisfy the test of causation, the conclusion that there was cover under the disease clauses was confirmed

  1. The prevention of access and hybrid clauses – interpretation

The Supreme Court rejected the narrow interpretation of the High Court, and instead found that instruction given by public authorities amounted to a “restriction imposed”, if the instruction was mandatory, carried the threat of legal compulsion and that compliance was required even without recourse to legal powers.

The “inability to use” and “prevention of access” to premises was determined as being applicable even if losing access for the purposes of a part of a business or access to a part of premises.

  1. Causation

Following the interpretation adopted on the disease clauses causation was a key issue for the parties. It has held in the Judgment that all cases of COVID-19 which had occurred by the date of any Government measure were to be treated as effective “proximate causes”. Claims should therefore be accepted if a policyholder can show that there was at least one case of Covid-19 within the relevant radius required under the specific disease clause, when any Government measure was introduced.

It follows in the Judgment that it was sufficient for any policyholder to show that at the time of any relevant Government measure there was at least one case of COVID-19 within the relevant radius required by any given Disease clause.

  1. The trends clauses

The Supreme Court construed that trends clauses are intended to address losses unconnected with the insured peril. Matters inextricably linked to the insured peril or the source of the insured peril are not trends and therefore would not be taken into account.

  1. Pre-trigger losses;

Consistent with its approach on trends clauses the Supreme Court confirmed that adjustments can only be made to reflect circumstances affecting the business which are unconnected with the cause of the insured peril.

  1. The Orient Express decision

In relation to the Orient Express case the Court found that this was wrongly decided and that it should be overruled.


The judgment should now enable payments to be made to policyholders who have been waiting the outcome of the case. However, it is anticipated that arguments on quantum are likely to see a slew of litigation, and Affiniti are already assisting law firms on funding such claims. Should you or your firm wish to see how Affiniti can help with litigation funding on these claims please contact us – enquiries@affinitifinance.co.uk


[1] The Financial Conduct Authority and others (Appellant/Respondents) v Arch Insurance (UK) Ltd and others (Respondents/Appellant) (supremecourt.uk)

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