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Coronavirus (COVID-19) business interruption test case - post-judgment analysis - construction, composite perils and causation

An analysis of the insurance and reinsurance implications of the High Court decision in the FCA's business interruption insurance test case.

On 15 September 2020 the High Court handed down its judgment in the FCA’s business interruption (BI) insurance test case. Pamela Freeland and Sarah Irwin of Weightmans, together with the Lexis®PSL Insurance and Reinsurance team consider the judgment and its implications.

The case is The Financial Conduct Authority v Arch Insurance (UK) Ltd and others (Hospitality Insurance Group Action and another intervening) [2020] EWHC 2448 (Comm).

The FCA’s decision to represent the interests of policyholders against insurers was controversial but, it seems, has been vindicated in that the first instance judgment has substantially progressed the impasse facing policyholders and insurers alike. It is a credit to all concerned that this inaugural financial markets test case was progressed with such rapidity and rigour. The result, a carefully reasoned judgment running to some 160 pages, looks set to resolve many issues of principle that were impeding prompt and fair settlement of coronavirus (COVID-19) BI claims. It has been hailed as a victory for policyholders. It is for some, but only those with policies of a type that has been held to respond to the coronavirus outbreak. Policyholders with prevention of access extensions, for example, were less fortunate.

The decision also advances the law of insurance in relation to the nature of insured perils and causation of loss, as well as clarifying several issues of policy construction, common to many non-damage BI policies.

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The insight was first published by Lexis®PSL Insurance & Reinsurance.

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