The Supreme Court handed down judgment this morning in the eagerly awaited FCA business interruption test case, following a leapfrog appeal from the High Court judgment given by Flaux LJ and Butcher J in November last year. The Supreme Court unanimously decided that there is cover in principle for COVID-19 related losses under all the clauses addressed on the appeal.

Giving the leading judgment, Lords Leggatt and Hamblen ruled that:

  • Policyholders with disease clauses had cover for BI losses following the occurrence of a case of COVID-19 within the specified radius of the clause. The causation requirement implicit in the disease clauses was “satisfied by showing that one or more cases of illness from COVID-19 had occurred within the specified radius before national restrictions which caused interruption of the insured business were imposed….”
  • Policyholders with prevention of access and hybrid clauses also had cover for BI losses caused by the insured peril, regardless of whether the losses were concurrently caused by other consequences of the COVID-19 pandemic.
  • The Orient Express Hotels case, originally decided by Lord Leggatt (as an arbitrator) and Lord Hamblen (as a judge), was wrongly decided and should be overruled. If the policyholder’s losses were concurrently caused by an insured peril and an uninsured peril which arose from the same underlying fortuity, loss resulting from both causes operating concurrently was covered.
  • Trends clauses could not be relied on by insurers to adjust claims downwards because of the concurrent, uninsured effects of COVID-19. The only adjustments which the clauses contemplated were for trends or circumstances unrelated to COVID-19.

Michael Crane QC acted for QBE UK Ltd in the Supreme Court, instructed by Clyde & Co.

Ben Lynch QC, Simon Paul and Nathalie Koh acted for the Hiscox Action Group (interveners), instructed by Mishcon de Reya. Christopher Knowles acted for the Group in the High Court.

Max Evans acted for the FCA throughout the test case, and Leigh-Ann Mulcahy QC and Deborah Horowitz acted for the FCA at the High Court trial, instructed by Herbert Smith Freehills. Richard Coleman QC also acted for the FCA at an earlier stage of proceedings.

The Supreme Court judgment is here, and the FCA’s BI test case website is here.