In a bid to resolve much of the uncertainty surrounding insurance cover for COVID-19 related business interruption (“BI“) losses, the FCA has now identified the representative sample of policy wordings to be examined in the High Court test case (“Test Case“) which may come to court as soon as July 2020.
Following its announcement on 1 May 2020 that the FCA would intervene to obtain court declarations, progress has quickly been made to identify the relevant wording alongside an initial list of insurers and proposed questions to be decided by the court.
Which policy wordings are included?
The proposed representative sample of policy wordings which the FCA believes captures the majority of the key issues that could be in dispute are set out in the Proposed Representative Sample of Policy Wordings, which can be found here.
Which Insurers are involved?
The following 16 insurers have been identified as using at least one of the policy wordings in the representative sample which will be examined in the Test Case:
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(*indicates the insurers who have agreed to participate in the Test Case as Defendants and who will, therefore, be bound by any judgment of the court.)
This list is apparently not exhaustive and the FCA says it intends to publish a full list of all relevant insurers and wordings in early July 2020.
What types of business interruption claims is the Test Case concerned with?
The comprehensive materials published by the FCA include a list of assumed facts which take into account the various scenarios which have been put forward.
What questions will the court be considering?
The central questions (applying the agreed/assumed facts) on which the FCA is seeking the court’s determination are:
- Whether there is cover in principle under the relevant clauses of the policies for COVID-19 related business interruption losses; and
- If so, whether policyholders can establish the necessary causal link between the losses sustained and the relevant liability covered by the policy.
The key issues (summarised here – full wording available in the Proposed Questions for Determination document) identified as common to the disputed BI claims are set out below.
| General Issues | What is meant by “interruption or “interference” with the business? Is closure required (if so, in whole or in part)? |
| Diseases Clause | Subject to any specific policy definitions, do the words “notifiable disease” or “human infectious or human contagious disease” include COVID-19? |
| If the disease is required to be in the “vicinity” of the insured premises, what does this mean? | |
| What is required to prove the disease was within a geographical limit of the premises (e.g. 25 miles)? | |
| What does an “occurrence” of notifiable disease mean? What does it mean for the disease to be “manifested” or “sustained by any person”? | |
| What is the meaning of an “outbreak” of a notifiable disease in the context of the policy? | |
| If a policy refers to a disease or outbreak being notifiable to the local authority, what is required to be proved by the policyholder? | |
| Denial / Prevention of Access Clause | What does the policyholder have to prove in order to establish (for example): “prevention of access to” or “inability to use” the premises? |
| Was the relevant interference due to (for example) “actions” or “advice” of, or “restrictions” imposed by government (or other authority as applicable)? | |
| If the relevant actions/advice etc. are required to be in the “vicinity” of the insured premises, what does this mean and when is it satisfied? | |
| If the actions/advice etc. must apply to a geographical limit of the premises (e.g. 1 mile, 25 miles), what is required by way of proof? | |
| Does COVID-19 constitute an “emergency [which is] likely to endanger life” (or similar)? | |
| Does a direction by “local authority” (or similar) effectively equate to a direction of “government”? | |
| Causation | What are the necessary causal links to be established? |
| Do the words (for example) “resulting from”, “caused by” or “in consequence of” require a proximate cause or something narrower or broader? | |
| What relevance do trends clauses (or similar) in the policy wordings in relation to quantification have, if any, in relation to the test for causation to be applied? | |
| Is there more than one potentially operative cause? If so, what is their legal effect, if any, on recovery? | |
| Exclusions | Does an exclusion for loss arising out of or relating to a “micro-organism of any type… including but not limited to any substance whose presence poses an actual or potential threat to human health” include SARS-CoV-2? |
| Does an exclusion relating to “pollution” or “contamination” apply to exclude cover? Does reference to “epidemic or disease” apply to exclude cover? |
What are the next steps for the Test Case?
The FCA has invited policyholders and their legal advisors (and other stakeholders) to provide their comments on these documents by 5 June 2020. Thereafter, the FCA aims to file its Claim Form and Particulars of Claim by 9 June 2020, and expects to receive the Insurers’ Defences by 23 June 2020.
It is anticipated that a 5 – 10 day hearing will take place in the second half of July 2020.
Given the extent to which this issue has affected businesses across the UK, the FCA and the court are moving incredibly quickly to try and provide clarity to businesses, many of whom are in desperate need for the cash injection that insurance cover will provide.