Legal Action Over Business Interruption Insurance Cover for Covid-19

Many businesses (ours included) have paid for additional cover on office insurance policies to include losses incurred as a result of having to close or reduce business operations due to non-physical risks. These policies often cover closure of premises due to government restrictions (i.e. lock-down) and/or an outbreak break of infectious or contagious disease (Covid-19).

Most (if not all) insurers have declined to pay on claims relating to the Covid-19 pandemic. The legal reasoning is generally that Covid-19 was not a known risk when the policies were written and was never intended to be covered. The economic reality is that if all policies paid out on all such claims many insurers would go bust.

This is new territory in insurance law and Policyholders have been threatening to bring class actions against insurers. The Financial Conduct Authority has therefore taken the matter up and, in an attempt to gain some clarity, has brought a claim in the Supreme Court seeking declarations to determine some of the key points about the application of such policies to the recent events of Covid-19 and the Government's actions to respond to the disease.

The claim was issued in the Supreme Court on 9 June 2020 under an accelerated procedure which means that it will be heard in Court in the last 2 weeks of July. That is an incredibly speedy timetable for such a complex set of facts and issues which reflects the fact that clear and binding legal authority is needed urgently so that businesses and insurers know what the legal position is.

We will of course be monitoring progress of the case and we will provide analysis of the Court's judgment when it is issued. In the meantime, for more information about the detail of the claim you can access the claim form and the particulars of claim through these links:

https://www.fca.org.uk/publication/corporate/bi-insurance-test-case-claim-form.pdf

https://www.fca.org.uk/publication/corporate/bi-insurance-test-case-particulars-of-claim.pdf

For more information about business interruption insurance cover please contact in our Litigation and Disputes Team.