Business Interruption Insurance Test Case: Supreme Court backs FCA

15th January 2021

Today’s Supreme Court judgment paves the way for thousands of businesses to have their claims for Covid-related business interruption losses paid.

We reported in September 2020 on a landmark High Court ruling for policyholders with certain business interruption insurance who have been forced to close as a result of the Covid-19 pandemic. The test case, which was the first under the courts’ Financial Markets Test Case scheme, was brought on policyholders’ behalf by the insurers’ regulator, the Financial Conduct Authority (FCA). It followed widespread concern over lack of clarity and certainty for businesses seeking to recover substantial losses incurred as a result of the pandemic.

Due to the importance and urgency of the issues raised, appeals by the FCA and insurers were ‘leapfrogged’ to the Supreme Court, bypassing the Court of Appeal. The Supreme Court delivered its judgment today [1], substantially allowing the FCA’s appeal and dismissing the insurers’ appeals. This paves the way for thousands of affected businesses struggling to survive through the pandemic to have their claims paid.

In a press release, which provides further detail on today’s judgment, the FCA says that it will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible. Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.

The FCA’s dedicated webpage for policyholders can be found here.

[1] The Financial Conduct Authority v Arch and Others [2021] UKSC 1