Supreme Court judgment in FCA’s business interruption insurance test case Click Here


The Supreme Court has substantially allowed the FCA’s appeal on behalf of policyholders. This completes the legal process for impacted policies and means that many thousands of policyholders will now have their claims for coronavirus-related business interruption losses paid. 


Sheldon Mills, Executive Director, Consumers and Competition at the FCA, commented:


'Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. This test case involved complex legal issues. Our aim throughout this test case has been to get clarity for as wide a range of parties as possible, as quickly as possible, and today’s judgment decisively removes many of the roadblocks to claims by policyholders.


'We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible. Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.


The Supreme Court’s judgment will be distilled into a set of declarations. The FCA and Defendant insurers are working as quickly as possible with the Supreme Court to enable the Court to issue its declarations.  


The FCA will publish a set of Q&As for policyholders to assist them and their advisers in understanding the test case. Once these are available we will send them out to members.


The FCA will also publish a list of BI policy types that potentially respond to the pandemic based on data that we will be gathering from insurers. Once these are available we will send them out to members.


The FCA has published draft guidance Click Here for policyholders on how to prove the presence of coronavirus, which is a condition in certain types of policy. 


The FCA will issue finalised guidance as soon as possible after that. Once these are available we will send them out to members.


The lawyers who acted on behalf of the FCA and in turn policy holders, Herbert Smith Freehills have published their summary of the outcome: Click Here


Disease clauses – interpretation 


A disease clause generally provides insurance cover for business interruption loss caused by the occurrence of a notifiable disease at or within a specified distance of the policyholder’s business premises. 


Prevention of access / hybrid wordings – interpretation 


A prevention of access clause generally provides insurance cover for business interruption losses resulting from public authority intervention preventing access to, or use of, the insured premises. A “hybrid” clause combines the main elements of disease and prevention of access clauses.


AIMS’ view


The FCA have said in response to the judgement that:


“The test case was not intended to encompass all possible disputes, but to resolve some key contractual uncertainties and 'causation' issues to provide clarity for policyholders and insurers. Today's judgment does not determine how much is payable under individual policies, but provides much of the basis for doing so.”


It is important to note that the judgement is in respect to businesses which were forced to close, namely pubs, restaurants etc. However, their enforced closure has resulted in significant business interruption to those in the supply chain.


We advise that at your earliest opportunity that you speak with your insurer / broker and ask that, in light of today’s judgement, that they provide reason as to why they will not settle a claim for business interruption with you.


We know from having seen many member’s policies that some contain ‘Loss of Gross Profit’ / ‘Loss of revenue’ clauses. You now need to explore the implications of today’s judgement with your insure / broker in respect to these clauses.

Everyone at AIMS is here to support any members, please email if you have any questions.