The high court ruling on business interruption insurance policies suggests Covid-19 claims should be paid in most cases where policies had pandemic or notifiable disease clauses.
A 162-page ruling was published but it is anticipated that insurers will appeal the judgement.
The case, heard in July, was brought by the Financial Conduct Authority (FCA), which looked to the court to provide clarity for business owners and the insurance industry. The hearing took place over eight days before Lord Justice Flaux and Mr Justice Butcher.
The FCA’s legal team at Herbert Smith Freehills (HSF) has said that while different conclusions were reached in respect of the 21 policy wordings assessed by the court, it found in favour of the FCA on the majority of the key issues, in particular in respect of coverage triggers under most disease and ‘hybrid’ clauses, certain denial of access/public authority clauses, as well as causation and ‘trends’ clauses.
Some 700 types of policies across affecting 60 different insurers and 370,000 policyholders could potentially be affected by the test case.
The judgment states that most, but not all, of the disease clauses in the sample provide cover. It also says that certain denial of access clauses in the sample provide cover, but this depends on the detailed wording of the clause and how the business was affected by the government response to the pandemic, including whether the business was subject to a mandatory closure order and whether it was ordered to close completely.
The test case has also clarified that the Covid-19 pandemic and the government and public response were a single cause of the covered loss, which is a key requirement for claims to be paid even if the policy provides cover.
Christopher Woolard, interim chief executive of the FCA, has told insurers they should “reflect on the clarity provided” and consider the steps they can take to progress claims of the type the judgement says should be paid.
If an appeal is made he said it should be done “in as rapid a manner as possible” adding that hundreds of thousands of jobs are potentially reliant on claim being paid.