Business interruption insurance – test case update – judgment expected in December or January

This is a very brief overview of very recent developments and is most definitely not an analysis of the arguments raised earlier this month before the Supreme Court, other than by way of a reminder that:

  1. the competing arguments of the parties – the FCA and the interested insurers – focus on the question of whether or not the range of representative business interruption (BI) wordings provide indemnity for operating losses sustained by policyholders during the first ‘lockdown’ of 2020, and
  2. the decision at first instance examined this by grouping the relevant clauses into three broad types – disease clauses, prevention of access clauses and hybrid clauses – interpreting each in its context, dealing with causation, prevalence of Covid-19, counterfactuals and with the effect on claims adjustment of so-called ‘trends’ clauses.

The hearing of the test case before the Supreme Court was not only a ‘leapfrog’ appeal direct from the High Court it was also expedited given its urgency and importance. The Supreme Court hearing began fortnight ago on Monday 16 November and ran over four consecutive days. As with the High Court’s hearings during the summer, it was necessarily held remotely and the written submissions of all of the parties were uploaded to https://www.fca.org.uk/firms/business-interruption-insurance shortly before the hearing. Full transcripts of each day’s proceedings in the Supreme Court have recently been posted to this site (the transcription of the proceedings runs to nearly 200 pages in total).

The five Justices hearing the test case were: Lords Reed (President of the SC), Hodge, Briggs, Hamblen and Leggatt. At the end of the final day, counsel for the FCA asked “the very awkward question about timing of a judgment … something that parties wouldn’t ordinarily ask about.” Lord Reed explained that the five Justices “will do what we can to produce a decision just as quickly as we can. But whether that will be before Christmas or sometime in January, I can’t tell you.”

The likely timing of the judgment was specifically mentioned last Friday by City Minister John Glen MP in responding to a Written Question on Business Insurance. His answer (here) also touches on the FCA’s general expectations of how insurers treat customers during the pandemic and on the somewhat controversial practice of setting off grant funds against BI claims and is certainly worth reading.


Alistair Kinley – Director of Policy and Government Affairs, BLM alistair.kinley@blmlaw.com

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