Find out how we are seeking legal clarity on business interruption (BI) insurance during the coronavirus (Covid-19) crisis. We’ll update this page with information on what we’ve done and are doing.
The coronavirus pandemic has led to widespread disruption and business closures resulting in substantial financial loss. Many customers have made claims for these losses under their BI insurance policies. There has been widespread concern about the lack of clarity and certainty for some customers making these claims, and the basis on which some firms are making decisions in relation to claims.
The issues surrounding BI policies are complex and have the potential to create ongoing uncertainty for both customers and firms. The variation in the types of cover provided and wordings used mean it can be difficult to determine whether customers have cover and can make a valid claim. There are genuine doubts over the appropriate interpretation of the wording in some cases. This has led to uncertainty and disputes, with many customers who believe they have valid claims having these rejected by their insurer.
We believe the circumstances of the current coronavirus emergency, and its effect on businesses holding BI policies means this uncertainty needs to be resolved as quickly as possible. We have sought court declarations as part of a test case, aimed at resolving the contractual uncertainty around the validity of many BI claims.
What the test case will decide
On 15 September, the High Court handed down its judgment in the test case.
Unless successfully appealed, the High Court judgment is legally binding on the 8 insurers that are parties to the test case in respect of the interpretation of the representative sample of policy wordings considered by the court. It also provides persuasive guidance for the interpretation of similar policy wordings and claims, that can be taken into account in other court cases including in Scotland and Northern Ireland, by the Financial Ombudsman Service and by the FCA in looking at whether insurers are handling claims fairly.
The test case was not intended to encompass all possible disputes, but to resolve some key contractual uncertainties and causation issues to provide clarity for policyholders and insurers. The judgment does not determine how much is payable under individual policies, but provides the basis for doing so, subject to any appeal.
We have published guidance setting out our expectation that, following final resolution of the test case (including any appeals), insurers should apply the judgment in (re-)assessing all outstanding or rejected claims and complaints which may be affected by the test case (except complaints that have been referred to the Financial Ombudsman Service). On 15 July, we published an updated list of policies with claims that may be affected.
Whilst the test case does not determine the quantification of any BI claims payments, we have issued a statement on considerations that should be taken into account when applying deductions of government support received by policyholders.
The steps we have taken so far are set out in the latest updates section below.
In the last two weeks of July, the trial of the test case took place over eight days in the High Court. Submissions were made by the FCA, the intervenors Hospitality Insurance Group Action and Hiscox Action Group, and the eight Defendants who had agreed to be part of the test case:
- Arch Insurance (UK) Ltd
- Argenta Syndicate Management Ltd
- Ecclesiastical Insurance Office Plc
- MS Amlin Underwriting Ltd
- Hiscox Insurance Company Ltd
- QBE UK Ltd
- Royal & Sun Alliance Insurance Plc
- Zurich Insurance Plc
The judgment was handed down on 15 September.
After judgment, a party may appeal the court’s decision, subject to procedural rules for seeking permission to appeal and making an appeal. If this happens, the parties to the test case have agreed as part of the Framework Agreement that they will seek to have any appeal heard on an expedited basis. This includes exploring the possibility of a ‘leapfrog’ appeal to the Supreme Court (an appeal which would not need to be heard by the Court of Appeal first).
It should be noted that the decision as to whether and where an appeal might take place will be a matter for the court. But the parties’ agreement to seek to expedite any such process is consistent with their mutual objective to achieve the maximum clarity possible for the maximum number of policyholders and their insurers in an expeditious and proportionate way.
Engagement with policyholders and insurance intermediaries
When we initiated the test case, we developed a Policyholder Engagement Statement for policyholders and insurance intermediaries which set out our approach to the test case for BI insurance policies, with the key points as follows:
- The FCA will put forward policyholders’ arguments to their best advantage using a highly experienced counsel team including Colin Edelman QC, Leigh-Ann Mulcahy QC, Richard Coleman QC, and Herbert Smith Freehills.
- The intended action will not prevent policyholders from pursuing issues through negotiated settlement, arbitration, court proceedings as a private party, or taking eligible complaints to the Financial Ombudsman Service.
- We wish to ensure that policyholders and insurance intermediaries are properly engaged throughout the test case process.
- Information provided by policyholders in response to our requests will be treated as confidential and covered by the FCA’s litigation privilege.
- We will consult policyholders and insurance intermediaries at key stages in the test case.
- We expect to make public all the 'pleadings' in the test case, and will update this webpage regularly and be available for discussion with action groups and policyholders and their legal representatives.
- See the latest updates section below for how you can comment at each stage of the case
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|25 September 2020||
Meetings with policyholders and other stakeholders
We received hundreds of requests for meetings with our legal team to discuss the impact of the test case. In order to cater to such high demand and to speak to as many policyholders and their legal representatives as possible, we held meetings over 4 days this week. These meetings addressed issues such as the impact of the judgment for policyholders with policies in the representative sample considered by the Court and for policyholders with other policies. We are grateful to all participants for their views, which we are taking into account.
The court has ordered that:
We will publish the sealed order of the court when it is available.
We will publish any documents referred to in the bullet points above, to the extent that we are permitted to, when they are available.
|18 September 2020||
Dear CEO letter on expectations of insurers
Following the judgment from the High Court, we have issued a Dear CEO letter outlining our expectations of insurers following the judgment.
The Court has confirmed that the consequentials hearing will take place on 2 October, where the Court will hear submissions from the parties on the appropriate declarations to be made by the Court in the light of the judgment and on any applications for appeal.
We will confirm the time of the hearing (probably 10:30) and publish details of the live-stream on this webpage when available.
|15 September 2020||
Publication of judgment and FCA press release
We have published the judgment in the test case, which has just been handed down by the High Court.
We have also issued a press release on the judgment.
Summary of judgment
The judgment is complex and runs to over 150 pages. Our legal team at Herbert Smith Freehills have published a summary on their website.
A hearing will shortly be fixed with the High Court, where any applications for appeal will likely be made. The court has agreed to live-stream this hearing if it is heard remotely. We will publish the hearing date and details of the live-stream on this webpage when available.
Next steps for policyholders
Every policyholder who has made a claim or complaint that is potentially affected by the judgment should receive an update from their insurer within 7 days.
In the meantime, the test case does not prevent policyholders making or settling any claim under their business interruption policy, making a complaint to their insurer if they are dissatisfied with the outcome, and referring their complaint to the Financial Ombudsman Service.
Complaints referred to the Financial Ombudsman Service
Policyholders with complaints at the Financial Ombudsman Service that are potentially affected by the judgment should await further information from the Ombudsman. The Ombudsman has published information on business interruption insurance complaints on its website.
Invitation to speak to our legal team
Our legal team has set aside time on 21 and 22 September to speak directly with as many policyholders and intermediaries and their legal advisers as reasonably possible, given the time constraints.
We will consider meeting requests made to us by 5pm on Thursday 17 September.
Please email: [email protected] stating only the word 'Meeting' in the subject line of the email and stating your availability in the body of the email. If you would like to talk about a particular policy, please email the policy document to us as well as correspondence from your insurer regarding whether your claim is potentially affected by the test case.
|9 September 2020||
Future handing down of judgment
The court has stated that judgment will be handed down at 10:30am on Tuesday 15 September 2020.
We will publish the judgment on this webpage once it has been handed down.
|18 August 2020||
Publication of final transcripts
We have published:
|3 August 2020||
Publication of draft transcript and Supplementary Notes
We have published:
|31 July 2020||
Conclusion of the trial
The trial has now concluded and judgment is awaited. We have amended this page above, including with information about what happens next.
Publication of draft transcript
We have published the draft transcript of day 7 of the trial.
|30 July 2020||
Publication of draft transcript
We have published the draft transcript of day 6 of the trial.
|29 July 2020||
Publication of draft transcript
We have published the draft transcript of day 5 of the trial.
|27 July 2020||
Publication of draft transcript
We have published the draft transcript of day 4 of the trial.
|24 July 2020||
Publication of draft transcript and Agreed Facts 3
We have published the draft transcript of day 3 of the trial.
We have also published Agreed Facts 3 – Prevalence of Covid-19.
|23 July 2020||
Publication of draft transcript
We have published the draft transcript of day 2 of the trial.
|22 July 2020||
Publication of draft transcript
We have published the draft transcript of day 1 of the trial.
|17 July 2020||
Publication of further documents for trial
We have published below a number of other documents which will be used as part of the trial commencing on Monday 20 July.
The Agreed List of Issues and Common Ground summarises what is and is not in dispute between the parties. This supersedes the Questions for Determination.
The Agreed Facts are sets of facts, with supporting evidence, which the parties have now agreed and which are necessary to resolve the issues in dispute:
The new Assumed Facts document contains factual scenarios which some parties will use in the trial to illustrate their views as to how coverage is triggered. These have developed out of the previous Assumed Facts document, as a result of discussion and agreement between the parties.
|15 July 2020||
Publication of Defendants’ skeleton arguments
We have published the Defendants’ skeleton arguments (written submissions) for trial:
We have also published the Defendants’ joint skeleton argument on the principles of contractual construction (interpretation) and Defendants’ joint skeleton argument on causation (of loss).
Those who wish to view the trial are reminded that it is to take place over 8 days, on 20-23 July and 27-30 July. The starting time can be checked on the final court listing after 4.30pm on the day before each day’s sitting.
We have published the trial timetable.
In order to view the trial live:
Publication of court order
Following the Case Management Conference on 26 June, we have published the sealed court order made.
List of affected insurers and policies
On 17 June 2020 we published Finalised Guidance for insurers in relation to the test case. We asked insurers to review relevant non-damage business interruption policies to determine whether the outcome on claims generally (including questions of causation of loss) may be affected by the final resolution of the test case. We asked insurers to provide us with their findings.
We have published the list of affected insurers and policies that were submitted to the FCA as part of this process.
The policies listed cover approximately 370,000 policyholders.
Insurers have been requested to update the FCA as the case develops on the outcome of this review. We will update the list to reflect any updated reviews as appropriate.
|13 July 2020||
Publication of skeleton arguments
We have published the FCA’s and Intervenors’ skeleton arguments (written submissions) for trial commencing on 20 July:
We have also published:
|3 July 2020||
Publication of Reply
Since 24 June we have received more than 90 detailed submissions from policyholders and other stakeholders on the Defences. We considered these when drafting the Reply. We also conducted numerous meetings with policyholders and other stakeholders as part of this process.
We have also published:
|30 June 2020||
Order from second Case Management Conference on 26 June
At this hearing, Lord Justice Flaux and Mr Justice Butcher gave various directions relating to how the test case is to proceed, including that:
We have published a draft, provisional transcript for the hearing, and will publish the final approved transcript as well as the court order when they are available.
Transcript of first Case Management Conference on 16 June
We have published the final approved transcript of this hearing.
|24 June 2020||
Publication of court order
Following the Case Management Conference on 16 June, we have published the sealed court order made.
The Defendants to the test case have now served their Defences. These state each Defendant’s written case, in response to the FCA’s Particulars of Claim. We have published each Defence below:
Invitation to comment on the Defences
The FCA’s Reply, which is the written response to the Defences above, is due on 3 July. The FCA’s skeleton argument (written submissions) for the final hearing is due after that. We are inviting policyholders, their insurance intermediaries, other stakeholders and their legal advisers to provide comments on the Defences, which we will consider when drafting our Reply and skeleton argument.
What we are asking for:
The earlier you can send your comments the better. We will consider comments provided to us by 3pm on Monday 29 June.
Please email: [email protected] stating only the word ‘Defences’ in the subject line of the email.
Where you are a member of an action group pursuing action against an insurer or of a relevant trade body, please could you also identify this clearly in the body of the email.
We will contact you if we have any queries in relation to the comments raised, but we will not be able to respond individually to all emails sent to this email address.
Invitation to speak to our legal team
Our legal team has set aside time on 30 June and 1 July to speak directly with as many policyholders and intermediaries and their legal advisers as reasonably possible, given the time constraints.
We will consider meeting requests made to us by 5pm on Friday 26 June.
Please email: [email protected] stating only the word 'Meeting' in the subject line of the email and stating your availability in the body of the email.
|17 June 2020||
Order from first Case Management Conference on 16 June
At this hearing, Mr Justice Butcher made an order relating to how the test case is to proceed, including that:
We will publish a copy of the court order and transcript for the hearing once they are available.
Link to live-stream future hearings
The court has agreed to live-stream the second Case Management Conference on 26 June and the final hearing starting on 20 July. The starting time for these hearings can be checked on the final court listing after 4.30pm on the day before each hearing.
In order to view these hearings live:
Notice to non-parties in the test case
In accordance with the order of Mr Justice Butcher on 16 June, notice is given that any non-party wishing to make an application under paragraph 2.5 of Practice Direction 51M should make any such application by 5pm on 24 June 2020 on notice to all parties to the litigation, any such application to be returnable at the Second CMC.
View Practice Direction 51M, a part of the Civil Procedure Rules 1998. 'Returnable at the Second CMC' means that any such application will be heard at the second Case Management Conference on 26 June 2020.
Finalised Guidance and Feedback Statement published
We have published Finalised Guidance setting out our expectations for insurers and insurance intermediaries when handling claims and complaints for business interruption policies during the test case brought by the FCA.
We have also published a Feedback Statement summarising the feedback received on our draft guidance published on 1 June 2020.
|15 June 2020||
Details of first Case Management Conference on 16 June
The first Case Management Conference before a Judge is now confirmed to take place on 16 June from 10.00am (or 10.30am depending on final court listing which can be checked after 4.30pm on 15 June 2020 by clicking here) to 4pm. At this hearing, the Judge will be invited to consider our application for expedition and admission to the Financial Markets Test Case Scheme, fix the timetable for the case (including the date for the court hearing in the second half of July) and deal with other procedural matters.
The court has agreed to live-stream this hearing. In order to view the hearing live:
|10 June 2020||
Start of proceedings in the High Court
We have started proceedings in the High Court and published the court documents related to this:
We have updated the initial list of affected insurers and the policy wordings they use to reflect the changes to the Representative Sample of Policy Wordings. Read a tracked changes version so that you can see how this document has developed to date from the proposal published on 1 June 2020 (which is also available below). As stated in the 1 June 2020 update , this list is not exhaustive, and our expectation remains to publish a list of all the relevant insurers and wordings that may be impacted by the test case in early July.
How we have engaged with stakeholders since 1 June
Since 1 June we have received more than 270 submissions from policyholders and other stakeholders on our proposed Questions for Determination and other documents relating to the scope of the test case that we published on 1 June. We and our advisers, Herbert Smith Freehills, have also conducted more than 45 consultations with policyholders and other stakeholders. We have taken account of the comments we received in formulating our Particulars of Claim and the other documents we published today. In particular:
Application for expedition
We have also published the documents relating to our application that the test case be heard urgently, and as part of the Financial Markets Test Case Scheme (which is a scheme for financial claims raising issues of general importance that require immediate court guidance):
First case management conference
The first Case Management Conference before a Judge is expected to take place on 16 June (TBC) . The Judge will be invited to consider our application for expedition and admission to the Financial Markets Test Case Scheme, fix the timetable for the case (including the date for the court hearing in the second half of July) and deal with other procedural matters.
We intend to ask the Judge to agree to live-stream this hearing, and will provide a further update on this as soon as we can.
Next invitation to provide comments – c.23 June
We expect to issue a further invitation to policyholders and other stakeholders to provide us with comments shortly after 23 June, when the insurer parties in the test case file their Defences. This will help us ensure that stakeholder comments are reflected in our Reply and skeleton arguments (written submissions) prepared for the final court hearing.
Update to our Policyholder Engagement Statement
|1 June 2020||
We announced that we have identified the representative sample of policy wordings to be examined in the test case, insurers that use those wordings, and which of those insurers we have invited, and have agreed, to participate in the proceedings.
The initial list of insurers and the policy wordings they use is not exhaustive, and we published a short consultation on draft guidance asking all insurers to check their policy wordings against those we intend to test to see if theirs will be impacted by the outcome of the case. We said our expectation was to publish a list of all the relevant insurers and wordings that may have impacted policies in early July.
The consultation on draft guidance also set out the FCA’s expectations of all firms handling BI claims and any related complaints between now and the court decision.
We also published 4 key documents, which we intend to invite the Court to consider and would therefore form the basis of the test case:
Invitation to comment on our documents
We invited policyholders, their insurance intermediaries, insurers, other stakeholders and their legal advisers to provide their comments on these documents by 3pm on Friday 5 June.
We also invited comments on these documents from the insurers who will be the parties to the test case.
Invitation to speak to our legal advisers
We invited policyholders and intermediaries to have consultations with our legal team at Herbert Smith Freehills on 3 and 4 June.
|15 May 2020||
We invited policyholders of BI insurance who are in dispute with their insurers over the terms of their policies to send us their arguments by 20 May 2020 if they wished us to take them into account as part of the test case. In particular, we asked for:
We needed policyholders’ arguments urgently in line with the FCA’s intention to seek the court’s view on relevant policies as soon as possible, and we said we would consider all arguments and information raised to us by 20 May 2020. We are taking those arguments into account as part of the test case.
We also provided a link to sign up to receive email updates.
|1 May 2020||
We issued a statement setting out our intention to obtain court declarations aimed at resolving the contractual uncertainty around the validity of many BI claims. We explained we are intending to take this action in the public interest to advance our consumer protection and market integrity objectives, with the aim of obtaining legal guidance more quickly and at lower cost to policyholders than would be the case if they took their own actions.
Alongside our statement, we asked insurance companies for information on their BI policies and wordings, and their intentions and decisions in relation to claims on these policies by 15 May 2020. We are using this information to consider, with external counsel, which policies we will seek to achieve a declaratory judgment on through the courts. We want a representative sample of wordings to give as much clarity as possible, whilst recognising that the need for an expedited court process means we can’t achieve clarity on every different wording. We are not yet in a position to definitively identify which policy wordings, or indeed firms, may be included in proceedings.
|15 April 2020||
We wrote to all chief executives of insurance firms. This Dear CEO letter outlined our expectations of firms with regard to the settlement of BI claims and the need to assess and settle claims quickly.
|19 March 2020||
We set out our expectations for insurance firms. This outlined our expectation that firms should consider very carefully the needs of their customers and show flexibility in their treatment of them.
03/08/2020: Information added Publication of draft transcript of day 8 and Supplementary Notes from certain parties
31/07/2020: Information added Update following conclusion of the trial and publication of draft transcript of day 7
30/07/2020: Information added Publication of draft transcript of day 6 of trial
29/07/2020: Information added Publication of draft transcript of day 5 of trial
27/07/2020: Information added Publication of draft transcript of day 4 of trial
24/07/2020: Information added Publication of draft transcript of day 3 of trial and Agreed Facts 3
23/07/2020: Information added Publication of draft transcript of day 2 of trial
22/07/2020: Information added Publication of draft transcript of day 1 of trial
20/07/2020: Information added Updating Defendants’ skeleton arguments with cross-referenced versions
17/07/2020: Information added Update on test case including publication of further trial documents
15/07/2020: Information added Update on test case and Defendants’ skeleton arguments published
13/07/2020: Information added Update on test case and FCA’s skeleton argument published
03/07/2020: Information added Update on test case and Reply published
30/06/2020: Information added Update on test case after second Case Management Conference
24/06/2020: Information added Update on test case and defences published
17/06/2020: Information changed Update on test case
15/06/2020: Information added Update on test case
10/06/2020: Information added Update on test case
01/06/2020: Information added Update on test case and draft guidance consultation