The High Court has backed policyholders in the business interruption test case brought against insurers that refused to honour Covid-19 claims earlier this year.
Policyholders won the majority of the key issues, according to the Financial Conduct Authority (FCA). The full judgment can be found here.
The FCA filed the test case against Hiscox, Arch Insurance UK, Argenta Syndicate Management, Ecclesiastical Insurance, MS Amlin Underwriting, QBE UK, RSA and Zurich, after identifying their business interruption policy wordings as capturing the majority of the key issues that could be at dispute in the legal proceedings brought in response to rejections of Covid-19 claims.
Hearings took place in July and the insurance sector has waited anxiously for the result, with numerous groups threatening class action suits for a perceived failure to cover legitimate claims on business interruption policies arising from a pandemic.
Commenting on the result, Christopher Woolard, interim chief executive of the FCA, commented: “We are pleased that the court has substantially found in favour of the arguments we presented on the majority of the key issues. Today’s judgment is a significant step in resolving the uncertainty being faced by policyholders. We are grateful to the court for delivering the judgment quickly and the speed with which it was reached reflects well on all parties.”
“Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful.”
Woolard advised insurers to “reflect on the clarity provided here and, irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgment says should be paid”.
Woolard continued: “They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.”
He called on any appeals to be “done in as rapid a manner as possible”, in line with an agreement struck with insurers at the beginning of the process.
In response to the High Court’s ruling, the British Insurance Brokers’ Association (BIBA) said: “We recognise how important this case is for cust