For current information regarding insurances and COVID-19: we are regularly updating this landing page as the situation progresses, please check here for guidance.

Business Interruption insurance

Latest update on the result of the FCA's Business Interruption test case

20th October 2020

The FCA has provided an update on its website and published the High Court declarations following the consequentials hearing on the 2 October 2020. These declarations explain how and to what extent the policies in the representative sample respond to BI losses arising from COVID-19.

Discussions between the FCA and the insurers/action groups are continuing in order to find a solution that resolves the outstanding issues as soon as possible and to enable pay-outs on eligible claims. In parallel, the FCA, the six defendant insurers and the Hiscox Action Group have applied to the Supreme Court for permission to appeal.

Further, the FCA has published its application for permission to appeal to the Supreme Court (dated 12 October 2020). It has also published (see here) the applications to appeal to the Supreme Court from the six defendant insurers and the Hiscox Action Group.

All of our clients affected by the judgment have been contacted, whether or not they have already submitted claims to insurers. We will continue to update our website with developments, for further information, click here for a link to the FCA website.

2nd October 2020

Following the consequentials hearing, the High Court granted certificates for a ‘leapfrog’ appeal to the Supreme Court, the FCA, six defendant insurers and the Hiscox Action Group are entitled to apply to the Supreme Court for permission to appeal.

The FCA has advised it is reviewing the final declarations to decide on next steps.

15th September 2020

The High Court has today handed down its judgment in the FCA’s Business Interruption insurance test case. We are currently considering this lengthy judgment and digesting the decision of the Court.

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 addition, we will be contacting all of our clients affected by this judgment, whether or not they have already submitted claims to insurers, in the near future. We will also post any further updates on this page of our website.

For further information, click here for a link to the FCA website.

The Association of British Insurers’ (ABI) view

From the very beginning, the ABI’s stance is that only very few insurance policies include Business Interruption (BI) cover for COVID-19. Their view is that:

  • It’s never been the intention of the insurance market to pay for the consequences of a pandemic
  • It’s unlikely that insurers have sufficient funds to cover such losses  
  • Protection ought to be provided by Governments or separately funded schemes*

*Similar arrangements have been put in place for Terrorism and Flood in the UK and other countries. Interested parties have already held preliminary discussions to work out how pandemic insurance might be provided in the future.

Legal action & effects on the financial security of insurers

The reality is that some policies contain exclusions or terms which mean COVID-19 is not covered but others are less clear. This has led to some well publicised legal challenges, particularly from the hospitality sector where businesses were forced to close – please see ‘Questions about Business Interruption (BI) cover’ below, for further information.

When placing your insurances, we take all reasonable steps to use insurers capable of meeting their future liabilities. The ABI has highlighted that insurers are unlikely to have sufficient funds to pay for the consequences of the pandemic, so the financial solvency (ability to pay future claims) of any that lose future court cases might be affected. This is something that the Financial Conduct Authority (FCA) will continue to closely monitor and we'll contact you if we believe you could be adversely affected.

Questions about Business Interruption (BI) cover:

I’ve seen in the press that some insurers are facing legal action?

The media have reported various responses made by insurers. The FCA have applied and succeeded in running a test case to resolve contractual uncertainty around Business Interruption (BI) insurance.

Whilst the FCA acknowledge that the majority of policyholders don’t have any cover, their focus is on the Non-Damage BI extensions of some insurer’s wordings that may have some potential cover.

Below is a timeline of what’s happened so far and how the FCA envisage the test case investigations will proceed. Please note; there remain a number of uncertainties to the timeline, including the consent of the court:

15th AprilFCA wrote a letter to the CEO's of London market insurers, specifically in relation to SME BI insurance.
1st MayFCA announced intention to obtain a court declaration for a test case to resolve contractual uncertainty around BI cover.
1st JuneFCA announced they’ve identified the representative sample of policy wordings to be examined in the test case, the insurers that use those wordings, and which of those insurers they have invited, and have agreed, to participate in the proceedings.
9th JuneFCA start claim in the High Court.
16th JuneCase management conference, at which the court will be invited to fix the timetable for the case and other procedural matters.
23rd JuneInsurers file Defences.
26th June Further case management conference, at which the court dealt with outstanding procedural matters.
3rd JulyFCA filed Reply.
10th JulyFCA and Intervenors’ skeleton arguments served.
14th JulyDefendants’ skeleton arguments served.
20-23rd & 27-30th July 8 day court hearing before Lord Justice Flaux and Mr Justice Butcher.
15th September

The High Court has handed down its judgment in the FCA’s Business Interruption insurance test case. We are currently considering this lengthy judgment and digesting the decision of the Court.

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 addition, we will be contacting all of our clients affected by this judgment, whether or not they have already submitted claims to insurers, in the near future. We will also post any further updates on this page of our website.

For further information, click here for a link to the FCA website.

2nd October

Following the consequentials hearing, the High Court granted certificates for a ‘leapfrog’ appeal to the Supreme Court, the FCA, six defendant insurers and the Hiscox Action Group are entitled to apply to the Supreme Court for permission to appeal.

The FCA has advised it is reviewing the final declarations to decide on next steps.

20th October

The FCA has provided an update on its website and published the High Court declarations following the consequentials hearing on the 2 October 2020. These declarations explain how and to what extent the policies in the representative sample respond to BI losses arising from COVID-19.

Discussions between the FCA and the insurers/action groups are continuing in order to find a solution that resolves the outstanding issues as soon as possible and to enable pay-outs on eligible claims. In parallel, the FCA, the six defendant insurers and the Hiscox Action Group have applied to the Supreme Court for permission to appeal.

Further, the FCA has published its application for permission to appeal to the Supreme Court (dated 12 October 2020). It has also published (see here) the applications to appeal to the Supreme Court from the six defendant insurers and the Hiscox Action Group.

All of our clients affected by the judgment have been contacted, whether or not they have already submitted claims to insurers. We will continue to update our website with developments, for further information, click here for a link to the FCA website.

The overall aim of this investigation is to speed up the process for customers making claims if they do have some cover and to protect the integrity of the industry - click here for further information.

Information correct as of: 26/10/2020

What is Sutton Winson's response to this?

In the best interest of our clients, we set up a specialist team to review all our commercial policies to find those which may have a small elementofcover. Having completed our own investigations and reviewed every commercial policy we place in order to assess the extent of BI cover available as a result of COVID-19, we have identified a small number of clients who have potential grounds potential grounds to claim under the BI section of a policy wording.

We have contacted those clients whose wordings are on the FCA test case list or have an element of cover. It is important that we emphasise that these are potential grounds, depending on specific circumstances, and subject to the outcome of the FCA test case.

Even if something favourable to policyholders is decided by the High Court in the FCA test case, there may still be other issues that need to be assessed by insurers.

We will continue to monitor the FCA test case on your behalf and will update you and inform you if anything positive is handed down by the High Court.

Information correct as of: 21/08/2020

Can I claim for COVID-19 under the BI section of my policy?

A standard BI policy doesn’t cover you for the losses relating to the impact of COVID-19. It’s designed to respond to losses following damage to property by e.g. a fire or flood. COVID-19 does not constitute “damage”.

Some policies have extensions for:

  • Denial of Access (non-damage)
  • Notifiable Diseases (non-damage)
  • Actions of Public Authorities (non-damage)

Information correct as of: 17/06/2020

My policy includes a Denial of Access (non-damage) extension, can I claim?

The cover is normally for damage to neighbouring property and may exclude actions to suppress and/or control the spread of a disease.

A small number of wordings have a wider extension and have been included as part of the FCA test case. At the moment, the insurers have denied there is any cover and await the outcome of the FCA test case to obtain a judgement.

Information correct as of: 17/06/2020

My policy includes a Notifiable Diseases (non-damage) extension, can I claim?

As COVID-19 is a new disease, it’s unlikely it will be specified under any policy.

Some policies aren’t specific and allow for 'Notifiable Diseases'. In cases where cover may apply, this will be again subject to the individual policy wording and circumstances.

A small number of wordings with this wider extension have been included as part of the FCA test case. At the moment, the insurers have denied there is any cover and await the outcome of the FCA test case to obtain a judgement.

Information correct as of: 17/06/2020

My policy includes a Public Authority (non-damage) extension, can I claim?

It will depend on the exact wording. In cases where cover may apply, this will be again subject to the individual policy wording and circumstances.

At the moment, the insurers have denied there is any cover and await the outcome of the FCA test case to obtain a judgement.

Information correct as of: 21/08/2020

Am I able to claim for loss of rent under my Commercial Property Owners policy?

If your policy has Denial of Access (non-damage) and Disease extensions it may respond due to:

  • An outbreak of a notifiable disease at the premises.
  • Denial/prevention of access by the UK Government, Police or Local Authority.

At the moment, the insurers have denied there is any cover and await the outcome of the FCA test case to obtain a judgement.

Information correct as of: 21/08/2020

Can I get cover for COVID-19 mid-term or at renewal under a BI policy?

As has been referenced previously, the majority of insurers don't intend to cover pandemics and many policies have a specific exclusion to this effect. Where there is any doubt, endorsements are being added at renewal to make this clear.

Pandemic Re was launched in April and is following the same template set by the government backed terrorism mutual, Pool Re set up in 1993. The steering group are working closely on a number of possible different approaches to providing cover for future losses from pandemic risks.

Information correct as of: 17/06/2020

Useful links

  • For the latest public information from the UK Government click here

  • For health advice and guidance from the NHS click here

  • For up-to-date travel advice from the Foreign & Commonwealth Office (FCO) click here

  • For the most recent information from the World Health Organisation (WHO) click here

  • For further information about UK Government support for businesses, click here

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