On 15 September 2020, the High Court handed down its judgment in the Financial Conduct Authority’s (FCA) test case which has been heralded as a “victory for consumers”.
The coronavirus pandemic has led to widespread disruption and business closures resulting in substantial financial loss. Many customers have made claims for these losses under their Business Insurance (BI) policies. However, there has been widespread concern about the lack of clarity and certainty for some customers making these claims.
However, on 15th September 2020, the High Court handed down its judgment in the FCA’s test case and it has been heralded as a “victory for consumers”. Their policies are likely to be construed widely so as to give them the best chance of bringing their coronavirus related losses within scope.
The insurers sought to argue that most policyholders’ losses were actually caused by the wider impact of coronavirus, not any issues local to the policyholder or its business premises, as required by their policies. The insurers claimed that if policyholders had been able to open their premises during the pandemic, the lack of passing of trade (caused by the wider lockdown) would nevertheless have left them open to suffer the same losses.
However, the judges took a different approach. The judges held that, if the above logic was applied, it would produce an irrational outcome whereby the more widespread and significant the problem, the less likely the policyholder would be able to recover its losses. This, of course, would have a significant impact on what could be claimed.
The decision is likely to resolve some key contractual uncertainties and causation issues to provide clarity for policyholders.
However, the ramifications of this case on those seeking insurance cover into the future cannot be underestimated – cover will be harder to obtain, policies will be drafted ever more technically and restrictively, and prices will rise further.
With this in mind, we would encourage in-house legal counsel to review their policies, as this judgment has removed a number of large roadblocks to successful claims, as well as helping to provide clarify for those that might not be successful.
For the full judgment, click here.