Supreme Court Rules in Covid-19 Business Interruption Test Case

Last week, the Supreme Court handed down its judgement in the Covid-19 Business Interruption test case. The ruling provides the definitive guidance on the operation of insurance cover under certain business interruption insurance extensions.

The Supreme Court found in favour of the FCA and policyholders, dismissing the appeal brought by the insurers and substantially allowing the FCA’s four appeals.

Whilst the case considered a representative sample of policy types and wordings by eight insurers, the ruling provides guidance for about 700 similar types of policies by a wide range of insurers. Insurers will therefore be expected to pay out on most (but not all) policies.

The news will be welcomed by tens of thousands of policyholders who have suffered business interruption because of the pandemic. The FCA is now working with insurers to conclude the processing of claims.

The Supreme Court’s judgement is lengthy and complex, running to 112 pages. A summary of which can be found on the FCA website.  Each policy now needs to be considered against the detailed judgement provided by the court and insurers will be expected to contact affected policyholders.

Policyholders who remain unhappy following their insurer’s assessment of their claim, can refer the claim to the Financial Ombudsman Service.

The FCA will publish a set of Q&As that will assist policyholders and brokers in understanding the implications of the test case. It will also publish a list of business interruption policy types that potentially respond to Covid-19.

The regulator has also published draft guidance to help policyholders, insurance intermediaries and insurers judge how the presence of Covid-19 in a particular area can be proved. The guidance, which remains under consultation until 22 January 2021, will be finalised as quickly as possible now that the Supreme Court has made its binding judgement.

So, what does a broker need to do?

Insurance brokers are encouraged to ‘adopt approaches that streamline and expedite claims handling for their clients’.

Brokers should be able to advise clients on what the judgement means for their policies. Under the draft guidance, it is proposed that intermediaries assisting policyholders with claims should act in accordance with the proposed guidance for policyholders, as outlined in the draft document. Those helping insurers assess claims should have regard for the draft guidance for insurers.

As a broker, you should:

  1. identify (if not already done so) which policies are impacted by this judgement;
  2. liaise with the relevant insurer to ensure that they are of the same view and establish that the insurer will be contacting customers who are impacted by the judgement ASAP;
  3. conduct an interim review of the impacted insurers’ exposure to ensure that you are satisfied with the impact this judgement could have on the insurer’s solvency status;
  4. consider what your future placements strategy will be for this type of risks; and
  5. be prudent, and make sure your client files are complete and up-to-date.


For further advice, please contact your RWA Business Manager.

About the author

Ash is Managing Director at RWA. He has over 15 years’ experience in the legal and compliance field and ten years in broker sales and leadership roles in national and global insurance firms.

He is highly skilled in the application of risk-based regulation, working closely with businesses at executive and board level to develop commercially viable, compliant systems and controls. Ash is adept in providing solutions-based interpretations of the FCA’s technical standards and facilitating the transfer of compliance skills and education needed for businesses to self-manage their own compliance and training needs.

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