COVID-19 business interruption insurance claims: what now for policyholders?

The recent landmark High Court judgment handed down on 16 June, by Mr Justice Jacobs, has cleared the path for policyholders to make claims under their business interruption (BI) insurance policies which had previously been rejected by their insurers.

The High Court ruled in favour of a number of policyholders, including Pizza Express Ltd, against insurers over pandemic-related BI losses. The policyholders argued that their policies, which required an outbreak of a notifiable disease at their premises, were sufficiently wide enough to cover their BI losses.

The case involved several preliminary issues in six expedited test cases heard in succession between 24 April and 4 May 2023. The policyholders in each test case alleged that they sustained substantial BI losses as a result of the Covid-19 pandemic. Each policyholder had a form of “at the premises” disease cover in their BI insurance policy. The policies involved in these test cases were underwritten by a number of insurers including Axa, Royal & Sun Alliance, Allianz, Zurich and Ageas.

Each test case had differently formulated preliminary issues. However, the central and key question across the test cases was whether the “at the premises” disease cover entailed the same approach to proximate causation as the disease covers considered by the Supreme Court in Financial Conduct Authority v Arch Insurance (UK) Ltd (“the FCA test case”). As Mr Justice Jacobs said, “Put shortly: does the decision of the Supreme Court on causation in the FCA test case apply to ‘at the premises’ or ‘ATP disease cover’?”

The Supreme Court decision

The Supreme Court ruling in the FCA test case dealt only with disease radius clauses, whereby only businesses with applicable policies could claim if the outbreak of Covid-19 was within a certain radius of their business premises.

Policyholders with “at the premises” disease clauses were told following the FCA test case that the ruling in that case did not extend to them. However, this decision now paves the way for these businesses to resubmit their claims to their insurers. In his judgment, Mr Justice Jacobs found that the Supreme Court’s analysis of causation applied to “at the premises” disease cover as well as radius cover. What will also be welcome to policy holders with these clauses, is that the Court found that that there needs to be no diagnosis of Covid-19 at the premises.

Next steps for policyholders

Following the Supreme Court FCA test case, it is estimated that at least £1.7bn has been paid out in settlements to businesses across the UK and that figure is likely to continue to rise following the High Court’s decision.

There are a number of hurdles to overcome, as every policy turns on its individual wording, but this decision will be very welcome for those policyholders with “at the premises” disease cover who were previously told that they could not recover their BI losses as the FCA test case did not apply to them.

That is clearly no longer the case.

If you have concerns about a Covid-19 BI insurance claim, please contact Marie-Claire di Mambro.