Who would argue that COVID-19 lead to widescale interruption of businesses across the world? Yet, whether your business interruption insurance policy would cover such losses would require a lengthy debate. Due to lack of clarity in the policy wordings with regards to COVID-19 related business interruption claims, the Financial Capital Authority (FCA) which regulates insurers and insurance intermediaries in the UK, filed a test case with UK High Court. The test case focused on a sample of 21 policy wordings underwritten by following insurers:

–        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 following summarizes timeline of this case:

15 Sep 2020 The High Court handed down its judgment.
31 July 2020The trial was concluded and judgement was awaited
10 June 2020Start of proceedings in the High Court
15 May 2020FCA invited policyholders of BI insurance who are in dispute with their insurers to send their arguments
1 May 2020FCA announced that it would commence court proceedings to test how certain business interruption insurance policies respond to claims arising from COVID-19.

The judgement was in favor of policyholders on many of the key issues. The case can affect more than 60 insurers, 700 different types of policies and 370,000 policyholders.

Similar course of action is likely to be considered by regulators in other jurisdictions. For example, the Insurance Council of Australia, after consultation with Australian Financial Complaints Authority, has filed a test case to seek clarity on business interruption insurance exclusions which is being heard at the Court of Appeal, the hearing started on 02 October 2020.

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