High Court Rules On Business Interruption Insurance And Covid-19

Posted on Sep 16, 2020. by NTI

It is reported today (Wednesday 16 September) that insurers and 'observers of insurers' (we don't know who the latter are, but we suspect they are not FBI) are running like rats on a carcass over a ruling by the High Court in a test case brought by the Financial Conduct Authority. This report actually gets more interesting, so hang in there.

The case centred around whether insurance policies should have covered the disruption to business caused by the Coronavirus. These policies are called 'business interruption policies' so we in the NTI newsroom think there's a clue there. The court assessed the wording of 21 policies and ruled that certain clauses that covered disease and denial of access to premises should have triggered payouts. That apparent sudden brightening of light over your mid-morning coffee is not solar activity, it emanates from the whitening of faces of insurers all over the UK who realise they could be about to lose their rather dull no-iron light blue shirts.

The FCA took to the steps of the court, looked around them at the grey-suited insurers who were starting to knot their ties and look for sturdy jibs and hurriedly said that, “Each policy needs to be considered against the detailed judgment to work out what it means for that policy,” and it did not necessarily mean that every policy would have to pay up for claims of loss caused by the pandemic, which would be ... oh, everyone.

A bit of historical context; the case was brought against eight insurers including Hiscox, RSA, QBE and Zurich over whether various business interruption policy wordings should cover for closures and disruption put in place due to the pandemic. The insurers claimed an absolute 'NO'. The High Court responded, "Well, actually, maybe ...". 

Hiscox said the judgment clarifies that fewer than one third of its 34,000 UK business interruption policies may give rise to potential liability, and it estimates additional Covid-19 claims arising from business interruption to be less than £100 million net of reinsurance. Their pals as RSA said the ruling upheld some but not all of its interpretations of provisions and it estimates the impact of this judgment to be around £85m, which it expects will be reduced further through reinsurance. Lawyers for the policyholders’ Hiscox Action Group (HAG, named after one of the group's sister) said they are writing to Hiscox “demanding immediate interim payments for many clients who are struggling to survive.”

Oooo, fight! Fight! Fight!

There is speculation that some of the insurers may appeal, but those 'observers' say that most are likely to take the judgment on the chin and pay out. The Association of British Insurers said it is important to look ahead so that there is a solution in the event of an ... then we fell asleep and missed the rest, hoping others had got the jist. 


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