On 10 June the regulator provided an update on the BI test case, having initiated declaratory proceedings on 9 June as planned. The update covers a wealth of material, including the claim form, the particulars of claim and further information on the factual hypotheses against which the sample business interruption policy wordings are to be tested.
The latest update from the FCA also sets out the procedural steps, and associated time limits, necessary to progress towards the proposed eight day hearing in the High Court starting on 20 July (subject to the court approving the draft order provided with the update). The test case has been organised with the FCA as claimant and with eight insurers as defendants.
No attempt is made here to summarise the material – the sheer volume and complexity of that makes summarising difficult and indeed potentially misleading because of the various assumed factual scenarios and subtly different insuring clauses and policy extensions involved.
The most appropriate summary is to be found in the claim form itself, where the essence of the test case is set out in 9 succinct points at its page 2. The heart of the dispute is captured in these terms at points 5 and 6:
5. The Defendants have confirmed to the Claimant their views that certain policies which they underwrite … and which provide cover in principle for business interruption losses without the need for physical/property damage may not cover losses resulting from the COVID-19 pandemic [and] further dispute whether as a matter of law and fact and in the light of the policies the necessary causal link to any loss suffered by customers which is the subject of claims under the policies can be established…
6. The Claimant contends that, subject to proof of loss and individual policy points such as sub-limits, the wordings written by the Defendants which have been selected to be tested in this claim do respond to the events of COVID-19 and the Governmental action responding to it in the first half of 2020.
The FCA has undertaken to provide a further update in around two weeks’ time, along with another opportunity for policyholder and other stakeholder feedback at that stage. The momentum of the High Court test case now looks almost unstoppable but whether the ultimate resolution of the issue is going to rest there must be highly debatable.
Alistair Kinley, Director of Policy & Government Affairs