The Supreme Court’s ruling in a landmark £1.2 billion legal battle over businesses ability to claim business interruption insurance decisively removes many of the roadblocks faced by policyholders.
After the United Kingdom High Court passed its long-awaited judgment on the Financial Conduct Authority’s Business Insurance Test case in September 2020, ruling in favour of policyholders on the majority of key issues, the United Kingdom Supreme Court granted permission for the Financial Conduct Authority and a group of insurance and reinsurance companies to appeal its ruling, specifically, Arch Insurance (UK) Ltd, Argenta Syndicate Management Ltd, Hiscox Insurance Company Ltd, MS Amlin Underwriting Ltd, QBE UK Limited and Royal & Sun Alliance Insurance Plc. Zurich Insurance Plc was also a respondent to the Financial Conduct Authority’s appeal, but did not separately appeal the decision of the court.
With over 370,000 companies impacted by this dispute, it comes as no surprise, as many small businesses have been impacted by Covid-19, with many pubs, cafes, wedding planners and beauty parlours facing near ruin, as they were turned down by insurers for business interruption policy claims on losses causes by the first national Covid-19 lockdown.
The Supreme Court addressed the issues arising on the appeals of the Financial Conduct Authority with respect to five areas:
- The interpretation of ‘Disease Clauses’ (i.e. those which can be triggered by the occurrence of severe acute respiratory syndrome coronavirus 2 (Covid-19), typically within a specified distance of the insured’s premises);
- The interpretation of ‘Prevention of Access’ clauses (i.e. those triggered by public authority intervention preventing access to, or use of, premises as a result of Covid-19);
- The interpretation of ‘Hybrid Clauses’ (i.e. those clauses which contain wording from both Disease and Prevention of Access Clauses);
- Whether the High Court was correct in its interpretation of ‘Trends Clauses’ (i.e. certain counterfactual scenarios in relation to the operation of the clauses in relevant policies which provided for loss adjustments); and
- The High Court’s analysis of Orient-Express Hotels Ltd v Assicurazioni Generali S.p.A.
In the Supreme Court ruling, Lord Hamblen noted that the High Courts interpretation of the aforementioned issues was ‘too narrow’. The Judge further went on to state that “An instruction given by a public authority may amount to a ‘restriction imposed’ if it carries the imminent threat of legal compulsion or is in mandatory and clear terms and indicates that compliance is required without recourse to legal powers”.
In a separate concurring judgment, Lord Briggs stated: “On the insurers’ case, the cover apparently provided for business interruption caused by the effects of a national pandemic type of notifiable disease was in reality illusory, just when it might have been supposed to have been most needed to policyholders”. Lord Briggs further went on to state: “The outcome seemed to me to be clearly contrary to the spirit and intent of the relevant provisions of the policies in issue”.
The result of the appeal of the landmark business interruption case will be welcomed news for small business across the United Kingdom.