A significant number of policyholders whose businesses were affected by the Coronavirus pandemic suffered significant losses. This resulted in a large number of claims under business interruption (BI) policies.
Most SME policies are focused on property damage and only have basic cover for BI as a consequence of property damage. But some policies also cover BI from other causes, in particular infectious or notifiable diseases (‘disease clauses’) and prevention of access and public authority closures or restrictions (‘prevention of access clauses’). In some cases, insurers have accepted liability under these policies. In other cases, insurers have disputed liability while policyholders considered that they had cover leading to widespread concern about the lack of clarity and certainty.
The FCA’s aim was to clarify key issues of contractual uncertainty for as many policyholders and insurers as possible. The FCA selected a representative sample of 21 types of policy issued by eight insurers. 370,000 policyholders were identified as holding 700 types of policies issued by 60 insurers that may be affected by the outcome of the test case.
The High Court’s judgment last September resolved most of the key issues but, because we were unable to reach an agreement, insurers and the FCA made ‘leapfrog’ appeals to the Supreme Court (without going to the Court of Appeal first).