Supreme Court Turns Tide Against Insurers

COVID Business interruption claims

And so following the city’s heavyweight lawyers brawling through the courts ( with Messrs Herbert Smith for the Financial Conduct Authority or FCA, Simmons and Simmons for the insurers ) we finally have a verdict. It’s not a knockout blow but a very good points decision for the FCA on appeal to the supreme court which turned the tide against the insurers at least for a good number of policyholders.

In short, the FCA sought clarity on business interruption policies for the widest range of parties possible following the onset of the global pandemic which has risked hundreds of thousands of jobs in businesses under a huge financial strain, and the judgement is said to remove many roadblocks for claims by policyholders. In terms of numbers, we are talking about some 370 000 businesses with approximately 700 types of policies issued by 60 different insurers. A sample of 21 policies was taken from 8 insurers and arguments were put forward on behalf of the insured i.e. you, and in the public interest – by the FCA. The size of money involved in this litigation and the payouts now due should not be underestimated and frankly are telephone numbers providing, it is hoped,  a vital lifeline to a lot of SMEs who are on their bootstraps. It is quite laudable that the FCA committed to such an action so speedily removing the need for years of endless litigation by various action groups of insured policyholders who would in part already be starved of cash, although whether, or how much,  satellite/offshoot litigation will ensue is yet to be seen.

The High court in September 2020 ordered that most disease clauses and prevention of access clauses did provide cover AND the virus, government and public response caused the BI. The insurers appealed, however, they were dismissed in the higher court but for different reasons.

This article will not do justice to the judgement in the supreme court of 112 pages but the following issues were broadly covered –

  • Disease – there is cover for “ any occurrence of a notifiable disease within a 25-mile radius of the premises”.
  • Prevention of access/hybrid wording – losses from public authority announcements/intervention would be taken as ordinarily meaning  “ mandatory”.
  • Causation – the court held “ there is nothing in principle or in the concept of causation which precludes an insured peril that in combination with many other similar uninsured events brings about a loss with a sufficient degree of inevitability from being regarded as a cause …..even if the occurrence of the insured peril is neither necessary nor sufficient to bring about the loss by itself.” Enough legal jargon – it is easier to make the link between the occurrence and the loss and the well-used and highly effective insurer argument on causation in this case has not been the get out of jail free card.
  • Trend clauses –  this has the effect of chipping down claims and effectively did not go the insurer’s way. In the absence of clear wording insurers now cannot reduce the indemnity/ payout due for the fact that the loss was caused equally by other perils the underlying cause of which was also Covid.
  • Pre-trigger losses – it was judged that the indemnity should be calculated on what would have been earned had there been no Covid in the first place.
  • Orient Express case – the high court amended some bad case law and overruled it making it easier to claim and harder for the insurer to make specific causation arguments.


There are still big differences between coverage and quantum of claims but it is hoped that the insurers will act swiftly and fairly to expedite claims with their own processes so as to avoid court proceedings.

For businesses wanting to make a claim for BI, firstly check your policy to see if it is covered and if unsure ask your broker or friendly lawyer.

BUT beware though as the brokers aren’t out of the firing line here – did you ask for full coverage? did your broker offer  BI cover and was pandemic BI offered? Pandemics have been on insurers radars for some years now – please see the UK National Risk and the insurers go-to tool, the Allianz risk barometer

There will undoubtedly be litigation around these topics but like everything, if you don’t ask, you certainly won’t get.

In the short term the FCA is due to publish a series of declarations, and then a series of questions and answers, listing those policies that should respond in order to help policyholders so in principle it should be possible to make a claim yourself and I would recommend that this path is chosen for claims of a modest amount. For those claims that are larger, again it is possible to make them yourself but perhaps like all things, the more money at stake, the more advice should be taken on a course of action. And it is not a guarantee that insurers will act on your timescale, or with the figures, you have genuinely lost.

If anything arises from the above please do not hesitate to contact me, Giles ward on 07789 401 411 or email

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