FCA test case: the perils of business interruption insurance and COVID-19

Richard Hopley (Partner, Cooley (UK) LLP, London) |
Sam Tacey (Special counsel, Cooley (UK) LLP, London) |

Introduction

The disruption caused by the COVID-19 epidemic has resulted in an influx of claims under property policies insuring business interruption. These claims are not in respect of “traditional” business interruption losses (involving physical damage to property affecting a business). Instead, the claims are under “non-damage” extensions. This has led to a number of difficult issues regarding cover for such claims. The Financial Conduct Authority (FCA), the UK insurance industry’s regulator, brought a test case in the English Commercial Court, representing the interests of a large number of policyholders, with the objective of determining issues of principle applying to claims in England.

The FCA’s test case involved eight insurers, two interveners and 21 lead policies and was taken to trial in an extremely short timescale. The decision (handed down on 15 September 2020)