The Supreme Court recently delivered its judgment in the business interruption test case brought by the Financial Conduct Authority (FCA) and has substantially allowed the appeal on behalf of policyholders.
The new judgement is weighted towards policyholders. So, what are the key things you should know about the new ruling and how it affects claims for coronavirus-related business interruption losses?
“Disease” clauses are triggered following the occurrence of at least one case of COVID-19 within the radius specified in the wording. The causation requirement is “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.”
The Supreme Court has broadened the cover available to policyholders for business interruption loss caused by the effects of the pandemic compared with the earlier High Court judgment. “Prevention of access” and “hybrid” extensions are triggered by the insured peril, regardless of whether the loss suffered was concurrently caused by other (uninsured but not excluded) consequences of the COVID-19 pandemic. It will continue to be necessary to compare policy wordings carefully against the judgments to work out whether there is cover in individual cases.
“Trends” clauses cannot be relied on by insurers to reduce the indemnity because of the concurrent, uninsured effects of COVID-19. Crucially, the only adjustments which can be factored into the indemnity calculation are in respect of trends or circumstances entirely unrelated to COVID-19.
The 2010 Orient Express Hotels case was wrongly decided and therefore overruled. Accordingly, if an insured’s losses were caused by an insured peril and an uninsured peril, which arose from the same underlying fortuity, loss resulting from both causes operating concurrently is covered.
Philip Rubens is a Partner at gunnercooke specialising in litigation and contentious financial services. Have you not been paid out for a business interruption claim as a result of the pandemic? Please get in touch as we may be able to help.
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