Business interruption insurance: the High Court has handed down its judgment in the Financial Conduct Authority’s (FCA) test case

The High Court has delivered its judgment in the Financial Conduct Authority’s (FCA) test case over disputed UK Business Insurance coverage in light of the Covid-19 (coronavirus) pandemic. The Court found in favour of the arguments raised by the FCA on most of the key issues.



The coronavirus pandemic has led to widespread disruption and business closures resulting in substantial financial loss. Many customers have made claims for these losses under their BI insurance policies. Most SME policies only cover property damage and have basic cover for BI as a consequence of property damage. Nevertheless, some policies also offer cover for BI arising from infectious or notifiable diseases (a notifiable disease is any disease that is required by law to be reported to government authorities) and non-damage denial of access and public authority closures or restrictions. In some cases, insurance companies have accepted liability under these policies, but others have refused to do so, leading to widespread concern about this lack of clarity. 

This test case marks an attempt to provide more clarity and reduce the amount of litigation around this issue. The test case is not intended to encompass all possible disputes, but to resolve some key contractual uncertainties. The FCA’s role was to put forward policyholders’ arguments to their best advantage, and the regulator selected a representative sample of policy wordings written by eight insurers: Arch, Argenta, Ecclesiastical, Hiscox, QBE, MS Amlin, RSA and Zurich. At stake is an estimated £9bn to £18bn of claims, and 370,000 policyholders were identified as holding policies that may be affected by the outcome of the test case. 


“Most, but not all, of the disease clauses in the test-case sample provide cover for losses triggered by the coronavirus pandemic”.

The regulator explains in a summary of the ruling that “the court found that most, but not all, of the disease clauses in the test-case sample provide cover for losses triggered by the coronavirus pandemic. It also says that certain denial of access clauses in the sample provide cover, but this depends on the detailed wording of the clause and how the business was affected by the Government response to the pandemic, including for example whether the business was subject to a mandatory closure order and whether the business was ordered to close completely. The test case has also clarified that the Covid-19 pandemic and the Government and public response were a single cause of the covered loss, which is a key requirement for claims to be paid even if the policy provides cover”. 

Christopher Woolard, Interim Chief Executive of the FCA, commented: “We are pleased that the Court has substantially found in favour of the arguments we presented on the majority of the key issues. 

Insurers will therefore need to take the outcome of this test case into account and, irrespective of any possible appeals, consider the steps they can take to progress claims such as those targeted by the judgment. Policyholders with affected claims can expect to hear from their insurance company within the next 7 days. 


What is the scope of this judgement?

It is important to note that this judgment does not say that the eight defendant insurers are liable across all of the 21 different types of policy wording in the representative sample considered by the judges.  The regulator underlines that “each policy needs to be considered against the detailed judgment to determine its impact on that policy”. Besides, this test case is not intended to set the amount payable under individual policies, but will provide much of the basis for doing so.

The regulator noted that the judgment may be appealed, and any appeal does not preclude policyholders seeking to settle their claims with their insurer before the outcome of any appeal is known.

A last point is highlighted by the FCA, which states that is important that “policyholders, action groups, insurance intermediaries and their legal representatives are properly engaged throughout the test case process. That’s why the regulator has arranged an opportunity for them to talk to its legal team individually on Monday 21 September or Tuesday 22 September”.