On Tuesday 15 September 2020 the High Court in the UK handed down its decision in the case of The Financial Conduct Authority v Arch and Others [2020] EWHC 2448. This case had acted as a test case in that jurisdiction on the issue of Business Interruption (BI) insurance claims arising out of the Covid-19 pandemic.
The Financial Conduct Authority (FCA), as regulator, brought a case against the defendants, being a number of insurance companies, on behalf of policyholders making a claim for business interruption relief caused by Covid-19 and the related restrictions that had been imposed.
As the case was taken on behalf of many policyholders there were variations in the provisions and wording of each policy. as regards BI coverage. In an effort to streamline the proceedings the parties agreed to separate the policies into three categories: –
- Disease wording: Where the provision provided for cover for BI as a result of the occurrence of a specified disease. The insurance companies argued on this point that this type of cover was only in relation to the effects of a local outbreak and only the losses stemming from the local outbreak were covered. The FCA and the Court disagreed and held that such a clause did give protection for BI caused by Covid-19.
- Prevention of access/public authority wording: Where cover was provided for BI where there was a prevention or an obstacle to access/use of a premises as a result of government restrictions. These provisions were interpreted more restrictively by the Court due to the variance between the Government advice and mandatory instructions issued across different industries and sectors.
- Hybrid wording: clauses which were triggered by restrictions introduced as a result of a notifiable disease. On these provisions the Court adopted an approach similar to the disease wording mentioned above and did not accept the argument advanced by the insurers that the protection only extended to losses suffered as a result of a local outbreak.
Causation
The insurance companies placed heavy reliance on the decision in the case of Orient Express Hotels Ltd v Assicurazioni General SpA [2010] EWHC 1186. This was a case that was taken as a result of damage to a property in New Orleans caused by Hurricane Katrina. This case gave a very confined meaning to causation in such circumstances applying a “but for” interpretation. The Court rejected this interpretation entirely as it was of the opinion that to follow this example would lead to a counterfactual situation whereby the more the business was insured the less cover that would have been available.
Conclusion
The decision in this case will be welcomed by policyholders on both sides of the Irish Sea and will give some authority for those who seek to be compensated under such BI policies. However, as was clear from this case, much will depend on the precise wording of an individual policy. Whilst it is true that the judgment in this case is not binding in this jurisdiction, it is clear that such a judgment could have significant persuasive authority for similar claims brought before the Irish Courts. There is no doubt that the parties involved in the Irish test case currently due to be heard in the High Court next month (October) involving FBD Insurance and several well-known pubs will have paid close attention to the findings of the High Court in the UK and that this judgment will have some influence on those proceedings.
Professional advice should always be taken before acting on any of the matters discussed. Please contact a member of our team should you wish to discuss this topic further.
