High Court deliver ruling on COVID 19 business interruption dispute

The Law Society Gazette reports that thousands of businesses, including law firms, which have suffered financial losses as a result of coronavirus, could receive a payout under their business interruption cover after the High Court handed down judgment in a test case brought by the Financial Conduct Authority.

The City watchdog said today’s judgment marks a significant step in resolving uncertainty faced by policyholders and removes several roadblocks to successful claims.

Explaining what the 162-page judgment means for policyholders, the FCA said the ruling did not find the eight defendant insurers liable across all 21 different types of policy wording in the representative sample considered by the court.

The FCA said each policy needs to be considered against the judgment to consider what that means for that particular policy. However, the test case removes the need for policyholders to resolve a number of key issues individually with their insurers.

Christopher Woolard, interim chief executive at the FCA, said: ‘Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful.

‘Insurers should reflect on the clarity provided here and, irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgment says should be paid. They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.

‘If any parties do appeal the judgment, we would expect that to be done in as rapid a manner as possible in line with the agreement that we made with insurers at the start of this process. As we have recognised from the start of this case, thousands of small firms and potentially hundreds of thousands of jobs are relying on this.’

The FCA and defendant insurers have agreed they will seek to have any appeal heard on an expedited basis, including exploring the possibility of any appeal being a 'leapfrog' appeal to the Supreme Court.

The FCA was represented by City firm Herbert Smith Freehills.

The judgement of Lord Justice Flaux Mr Justice Butcher is available at the link below:


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