Court finds in favour of arguments advanced for policyholders by FCA on majority of key issues
The High Court has today provided welcome clarity on a number of uncertainties around business interruption claims.
While the court has reached nuanced conclusions, specific to each representative sample policy wording, it has agreed with the FCA on the majority of the key issues.
The court determined the outbreak of COVID-19 was the “occurrence” of a notifiable disease for the purposes of that cover where there were diagnosable cases in the relevant geographical area under the policy. Further, cover was not limited to outbreaks within the geographical radius.
The court, however, took a more conservative view on the prevention of access/competent authority cover, which is commonly taken out by hospitality businesses. The court found cover in some wordings but, in general, losses claimed under this clause will require a detailed review of the policy wording against the judicial guidance to establish precisely where cover applies.
On the key question of causation, the court determined that the pandemic and Government’s response to it were a single cause of the covered loss for the purposes of establishing the quantum of claims. This will be significant when determining pay outs under the relevant policies.
Commenting on today’s judgement, UKHospitality Chief Executive Kate Nicholls said: ““The confusion around business interruption insurance policies came at the worst possible time for businesses. They found themselves being denied support they thought they were entitled to in the middle of the worst crisis they have known.
“We are very pleased that this ruling, generally speaking, finds in favour of businesses who had taken out policies in good faith and may now have cover following the court’s guidance. Our sector is still on a knife-edge and needs all the support it can get.”
Katie Chandler, Taylor Wessing added: “This is good news for the hospitality sector and the court’s guidance gives the clarity needed, which can now be applied to assist relevant policyholders with their BI claims. Not all policyholders will benefit though and it does all still very much depend on the detailed reasoning as applied to each policy wording, which fell within the scope of the FCA’s test case. UKHospitality members’ participation in this landmark test case has paid off and we’re pleased to continue to support the sector in this way.
“We understand that insurers have been ordered to contact impacted policyholders within 7 days of this judgment. If Members have any questions, we are organising a UKH webinar where Taylor Wessing will provide expert legal insights into the impact of this decision and next steps for relevant policyholders including any likely grounds for appeal by the insurers.”
Rafi Saville, forensic partner at accountancy firm HW Fisher said:
“This a landmark case and one of the most controversial legal issues resulting from the coronavirus crisis. Today’s decision will affect over 400,000 small and medium businesses particularly in the leisure, property and hospitality industry who were forced to close their doors back in March. The ruling is likely to considered as a partial victory and it could have a ripple effect for the entire marketplace, with its conclusions likely to be applied to other affected claims. However, the decision today could possibly add to the confusion experienced by many business owners.
“It is now crucial for these businesses to pay attention. Although the ruling may well be subject to an appeal, it becomes even more necessary for businesses to consult their insurance documentation with a view to understanding whether their Covid related losses will be covered. At this early stage, we understand that policies covering “notifiable diseases” will be covered under the ruling.”