FCA Test Case Appeal: Making a Claim for Business Interruption due to Covid-19

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16 June, 2021

Stephen McArdle
Partner, Head of Commercial Litigation

As restrictions are beginning to ease, businesses will likely be returning to their normal operations, and as such, may be looking to make an insurance claim for business interruptions suffered due to the Government restrictions imposed in response to the pandemic.

In January 2021, the Supreme Court handed down judgment in FCA v Arch Insurance (UK) Ltd and others [2021] UKSC 1, an appeal from the High Court test case surrounding business interruption insurance, FCA v Arch Insurance (UK) Ltd and others [2020] EWHC 2448 (Comm).

The Supreme Court Judgment

The Supreme Court unanimously dismissed the appeals of the insurance companies and allowed the appeals of the FCA and the Hiscox Action Group. In making its decision, the Supreme Court considered issues surrounding:

1. Disease Clauses;

2. Prevention of Access and Hybrid Clauses;

3. Causation;

4. The Trends Clauses;

5. Pre-Trigger Losses; and

6. The Decision in the former case of Orient-Express Hotels Ltd v Assicurazioni Generali SpA [2010] EWHC 1186 (Comm).

Briefly, the effect of the Supreme Court judgment is that all for the disease clauses, prevention of access and hybrid clauses provide cover in principle for BI losses caused by the COVID-19 pandemic. For further information, see our previous article Business Interruption Claims & Covid-19 - What's next?

Business Interruption Claim

Following the Supreme Court decision, policyholders may be able to bring a claim for Business Interruption as a result of the Government's guidelines in response to the Covid-19 pandemic. Further, any policyholder who has already made a claim, may be able to have their claim reconsidered by their insurance company.

On 22 March 2021, the FCA issued guidance for policyholders, insurance companies and insurance intermediaries to assist in making any claim for business interruption and this guidance will cease to have effect on 31 January 2022. The full guidance may be found on the FCA's website: https://www.fca.org.uk/publications/finalised-guidance/business-interruption-insurance-test-case-proving-presence-coronavirus.

Determining the Relevant Policy

The guidance outlines the first steps a policyholder should take in order to determine whether the relevant clause of their insurance policy has wording that:

1. Requires the presence of disease within a particular distance, zone or radius from the premises;

2. Requires the presence of disease within a vicinity or area where events that occur within such area would be reasonably expected to have an impact on the policyholder;

3. Requires the occurrence of a notifiable disease without specifying a particular vicinity or area within which the disease needs to occur.

If any of the above apply to the clause set out within the insurance policy, it is important to obtain evidence of the presence or occurrence of the disease in the proximity of the business, otherwise known as the Relevant Policy Area.

Evidence of Covid-19

Policyholders may be required to obtain specific evidence to prove the presence of Covid-19 in the Relevant Policy Area, including:

1. Personal knowledge of someone who tested positive, was diagnosed with or manifested symptoms of Covid-19;

2. Reports from reliable media outlets of cases of Covid-19 at care homes, hospitals, restaurants, schools or other businesses in the Relevant Policy Areas;

3. Personal knowledge of a staff member who tested positive within a 7-day period after being present at the business premises;

4. Personal knowledge of a customer or guest who tended positive within a 7-day period after attending the business premises;

5. Contacting a local GP surgery to request information about whether they had a patient who tested positive or who displayed symptoms within the relevant period;

6. Contacting a local school or university to request information about whether a student or teacher tested positive during the relevant period; or

7. Official statements or press releases from universities confirming a case of Covid-19.

Additionally, policyholders may also in principle be able to use the following to prove the presence of Covid-19 in the Relevant Policy Area:

1. NHS death data;

2. ONS death data;

3. Cases reported by the UK Government;

4. Estimated cases in the Relevant Policy Area; or

5. Geographical distribution of Covid-19 cases in the Relevant Policy Area.

Further information on the specific evidence required may be found in the FCA guidance referenced above.

Evidence of Loss

In addition to providing evidence of Covid-19, policyholders will also be required to provide evidence of the losses they sustained, which is likely to include:

1. Historic Balance Sheets and Profit and Loss Accounts;

2. Balance Sheets and Profit and Loss Accounts for the relevant period; and

3. Details of any incomings and outgoings during the relevant period.

Once policyholders have the relevant evidence in relation to the presence of Covid-19 and the losses sustained, they should present their claim to their insurance company.

For more information contact Stephen McArdle in our Business Dispute Resolution department via email or phone on 0333 207 1142. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

Learn more about our Business Dispute Resolution department here

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