Supreme Court judgement on business interruption test case set for Friday

By James McAllister

- Last updated on GMT

Supreme Court judgement on business interruption test case set for Friday

Related tags: Insurance, Coronavirus, Legal action, Supreme Court, High court

The Supreme Court will deliver its judgement on the landmark test case brought by the Financial Conduct Authority (FCA) against leading insurers over business interruption payouts this week.

In its latest update on the case, the FCA confirmed that the Supreme Court will deliver its judgment on Friday 15 January 2021 at 9:45am.

It is understood that the delivery of the judgment may last around 15 minutes, and the full written judgment is likely to be published on the Supreme Court’s website​ very soon after that.

The judgement will represent the final word on whether insurers should pay out on business interruption claims related to the Coronavirus pandemic.

In the wake of the original nationwide Coronavirus lockdown back in March, hundreds of thousands of businesses including restaurants, pubs and bars were forced to close, and subsequently made claims on their business interruption insurance.

However, many insurers disputed the claims and argued that policies were never meant to cover such unprecedented restrictions.

Eight insurance firms including Hiscox, RSA and QBE were involved in the original test case, which was first announced by the FCA back in June​.

The City regulator said at the time that its aim in bringing the test case was to urgently clarify key issues of contractual uncertainty for as many policyholders and insurers as possible.

In September, the High Court ruled that the majority of businesses forced to close in March due to the Coronavirus lockdown are entitled to be compensated​ under their business interruption insurance.

However, the test case was subsequently fast-tracked for appeal and as a result many businesses still did not receive payouts.

The case went before the Supreme Court in November​. 

From a sample of 21 policy wordings that the FCA said captured ‘the majority of the key issues that could be in dispute’, the High Court ruled in June that most, but not all, of the disease clauses provided cover.

The FCA and Hiscox Action Group of policyholders sought to appeal some aspects of the judgment in the Supreme Court, as did insurers Arch, Argenta, Hiscox, MS Amlin, RSA and QBE.

In total, rulings on 13 of those policy types were appealed against.

The lower court said 11 of the policies should have led to payouts, which were appealed against by the insurers. The FCA, meanwhile, appealed the two policies judges ruled should not be paid out.

Two insurers, Zurich and Ecclesiastical, said at the time that the judgement found entirely in their favour and the FCA decided not to appeal against the findings.

The Supreme Court's decision could affect around 700 types of policies and just under 400,000 policyholders, with the final ruling by the Supreme Court judges providing a benchmark for other policies.

The Financial Ombudsman Service and courts in Scotland and Northern Ireland are also expected to use the judgment to rule on other, similar cases.

Related topics: Legislation

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