Insurance policyholders win Covid-19 UK high court test case

Ruling is a ‘significant victory’ for claimants over business interruption payouts

UK holders of business interruption insurance have won a “significant” victory in a high court test case to determine whether the coronavirus pandemic should trigger payouts under their policies.

Lawyers acting for the financial conduct authority (FCA) , which brought the case on behalf of the policyholders, said the judges had found in favour of claimants “on the majority of the key issues”.

In particular, they ruled that payouts were triggered under certain “non-damage” clauses that covered disease and denial of access to business premises.

Paul Lewis, partner and global head of insurance disputes at the FCA’s law firm Herbert Smith Freehills, said policyholders would need to read the 160-page judgment from Lord Justice Flaux and Mr Justice Butcher very carefully to see how the principles laid down by the court applied to their particular policy wording. In all, the judgment considered 21 wordings, and reached different conclusions for each.


However, he added: “This is a really significant judgment. It brings guidance to how business interruption insurance wordings should operate in the context of the Covid-19 pandemic, which has had such a devastating effect on businesses across the country. The decision should bring welcome news to a significant number of policyholders.”

According to FCA estimates, the findings could effect as many as 370,000 policyholders one way or another - and successful claims could potentially run to tens of thousands of pounds.

Immediately after the judgment, shares in insurance companies Hiscox and RSA, which were involved in the case, were down 6 per cent and 3 per cent respectively.

But the insurers have the right to fast-track an appeal on the judgment straight to the supreme court. – Copyright The Financial Times Limited 2020