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The Financial Conduct Authority (FCA) has succeeded in its appeal to the Supreme Court in its test case seeking urgent clarity as to the requirement of insurance companies to pay policyholders for business interruption (BI) losses arising from the COVID-19 pandemic.

The Supreme Court’s decision provides useful guidance on the meaning, effect and application of certain common non-damage BI insurance clauses, including “Disease Clauses”, “Prevention of Access Clauses”, “Hybrid Clauses”, and “Trends Clauses”, in the context of COVID-19. These are categorised as follows:

  • Disease Clauses – clauses which provide cover for business interruption losses resulting from the occurrence of a notifiable disease, such as Covid-19, at or within a specified distance of the business premises;
  • Prevention of Access Clauses – clauses which provide cover for business interruption losses resulting from public authority intervention preventing or hindering access to, or use of, the business premises;
  • Hybrid Clauses – clauses which combine the main elements of the disease and prevention of access clauses;
  • Trends Clauses – clauses which provide for business interruption loss to be quantified by reference to what performance of the business would have been, had the unexpected event not occurred

In its judgment, the Supreme Court held each of the above categories of clauses should properly be interpreted as providing cover for business interruption which can be shown to be caused by Covid-19. This decision will, therefore, benefit many businesses.

Those businesses who have suffered losses as a result of the pandemic should undertake a review of their insurance policies to determine whether they are eligible to recover under the terms. Also, those businesses who have previously had an affected claim rejected by their insurer, should now be considering requesting their claim be reconsidered.

If you require further information about this test case, a copy of the Supreme Court judgment can be found here: https://www.supremecourt.uk/cases/docs/uksc-2020-0177-judgment.pdf

If you require any assistance, or advice in respect of the validity of a potential business interruption claim, please contact Graham Young on 01483 796002 or email gyoung@cheyneygoulding.co.uk