Business interruption insurance

Find out how we are seeking legal clarity on business interruption (BI) insurance during the coronavirus (Covid-19) crisis. We’ll update this page with information on what we’ve done and are doing.

The coronavirus pandemic has led to widespread disruption and business closures resulting in substantial financial loss. Many customers have made claims for these losses under their BI insurance policies. There has been widespread concern about the lack of clarity and certainty for some customers making these claims, and the basis on which some firms are making decisions in relation to claims.

The issues surrounding BI policies are complex and have the potential to create ongoing uncertainty for both customers and firms. The variation in the types of cover provided and wordings used mean it can be difficult to determine whether customers have cover and can make a valid claim. There are genuine doubts over the appropriate interpretation of the wording in some cases. This has led to uncertainty and disputes, with many customers who believe they have valid claims having these rejected by their insurer.

We believe the circumstances of the current coronavirus emergency, and its effect on businesses holding BI policies means this uncertainty needs to be resolved as quickly as possible. We intend to obtain court declarations as part of a test case, aimed at resolving the contractual uncertainty around the validity of many BI claims.

What the test case will decide

The result of the test case will be legally binding on the insurers that are parties to the test case in respect of the interpretation of the representative sample of policy wordings considered by the court. It will also provide persuasive guidance for the interpretation of similar policy wordings and claims, that can be taken into account in other court cases including in Scotland and Northern Ireland, by the Financial Ombudsman Service and by the FCA in looking at whether insurers are handling claims fairly.

The test case is not intended to encompass all possible disputes, but to resolve some key contractual uncertainties and ‘causation’ issues to provide clarity for policyholders and insurers. It will not determine how much is payable under individual policies, but will provide the basis for doing so.

We have published guidance setting out our expectation that, following final resolution of the test case (including any appeals), insurers should apply the judgment in (re-)assessing all outstanding or rejected claims and complaints which may be affected by the test case (except complaints that have been referred to the Financial Ombudsman Service). We expect to publish a list in mid July of all policies with claims that may be affected.

The steps we have taken, latest updates and timetable

The steps we have taken so far are set out in the latest updates section below.

Following court orders on 16 and 26 June, it is expected that the test case will proceed on the following timetable:

9 JuneFCA started claim in the High Court
16 JuneCase management conference, at which the court fixed the timetable for the case and other procedural matters
23 JuneInsurers filed Defences
26 JuneFurther case management conference, at which the court dealt with outstanding procedural matters
3 JulyFCA files Reply
10 JulyFCA and Intervenors’ skeleton arguments served
14 JulyDefendants’ skeleton arguments served
20-23 July and 27-30 July8 day court hearing before Lord Justice Flaux and Mr Justice Butcher

Engagement with policyholders and insurance intermediaries

We have developed a Policyholder Engagement Statement for policyholders and insurance intermediaries which sets out our approach to the High Court test case for BI insurance policies, with the key points as follows:

  • The FCA will put forward policyholders’ arguments to their best advantage using a highly experienced counsel team including Colin Edelman QC, Leigh-Ann Mulcahy QC, Richard Coleman QC, and Herbert Smith Freehills.
  • The intended action will not prevent policyholders from pursuing issues through negotiated settlement, arbitration, court proceedings as a private party, or taking eligible complaints to the Financial Ombudsman Service.
  • We wish to ensure that policyholders and insurance intermediaries are properly engaged throughout the test case process.
  • Information provided by policyholders in response to our requests will be treated as confidential and covered by the FCA’s litigation privilege.
  • We will consult policyholders and insurance intermediaries at key stages in the test case.
  • We expect to make public all the ‘pleadings’ in the test case, and will update this webpage regularly and be available for discussion with action groups and policyholders and their legal representatives.
  • See the latest updates section below for how you can comment at each stage of the case

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Latest updates

30 June 2020

Order from second Case Management Conference on 26 June

At this hearing, Lord Justice Flaux and Mr Justice Butcher gave various directions relating to how the test case is to proceed, including that:

  • The Hospitality Insurance Group Action and the Hiscox Action Group were permitted to intervene in the test case. Each may file written submissions and make brief oral submissions at the hearing in July.
  • Certain facts have been accepted as ‘Agreed Facts’ for the purposes of the test case.
  • Royal & Sun Alliance Insurance Plc was not permitted to rely on factual evidence about a policy wording which was outside the Representative Sample.
  • The FCA was not permitted to rely on expert evidence in relation to two policy wordings of Ecclesiastical Insurance Office Plc. In particular, this concerned a list of ‘specified diseases’ which the FCA’s evidence suggested were unlikely to lead to a widespread outbreak in the UK.
  • The FCA was permitted to amend its Particulars of Claim in relation to the prevalence of Covid-19 in the UK. The FCA has agreed that it will revert to the Court by Friday 3 July to indicate if it wishes the Court to reserve time in the new Commercial Court term starting in September for the determination of issues related to the under-recording of the prevalence of Covid-19 in the UK.
  • Various procedural matters were decided, such as timing of written submissions, and sequence of oral submissions at the hearing in July. The first 3 days of the hearing in July were allocated to the FCA and Intervenors, the next 4 days to the Defendants, and the last day to the FCA and Intervenors.

We have published a draft, provisional transcript for the hearing, and will publish the final approved transcript as well as the court order when they are available.

Transcript of first Case Management Conference on 16 June

We have published the final approved transcript of this hearing.

24 June 2020

Publication of court order

Following the Case Management Conference on 16 June, we have published the sealed court ordermade.

Publication of Defences

The Defendants to the test case have now served their Defences. These state each Defendant’s written case, in response to the FCA’s Particulars of Claim. We have published each Defence below:

Invitation to comment on the Defences

The FCA’s Reply, which is the written response to the Defences above, is due on 3 July. The FCA’s skeleton argument (written submissions) for the final hearing is due after that. We are inviting policyholders, their insurance intermediaries, other stakeholders and their legal advisers to provide comments on the Defences, which we will consider when drafting our Reply and skeleton argument.

What we are asking for:

  • We are inviting comments specifically on the Defences published above, and encourage you to specify which paragraph of which Defence you are commenting on.
  • Comments might also include alerting us to specific clauses or wording in your policy (as long as that policy is already part of the test case) or in correspondence you have received from a Defendant, perhaps because they are inconsistent with the interpretation put forward in a Defence.
  • We are not inviting requests for particular policies to be added to the test case at this stage.

The earlier you can send your comments the better. We will consider comments provided to us by 3pm on Monday 29 June.

Please email: biinsurancetestcase@fca.org.uk stating only the word ‘Defences’ in the subject line of the email.

Where you are a member of an action group pursuing action against an insurer or of a relevant trade body, please could you also identify this clearly in the body of the email.

We will contact you if we have any queries in relation to the comments raised, but we will not be able to respond individually to all emails sent to this email address.

Invitation to speak to our legal team

Our legal team has set aside time on 30 June and 1 July to speak directly with as many policyholders and intermediaries and their legal advisers as reasonably possible, given the time constraints.

We will consider meeting requests made to us by 5pm on Friday 26 June.

Please email: biinsurancetestcase@fca.org.uk stating only the word ‘Meeting’ in the subject line of the email and stating your availability in the body of the email.

17 June 2020

Order from first Case Management Conference on 16 June

At this hearing, Mr Justice Butcher made an order relating to how the test case is to proceed, including that:

  • the case will be expedited (heard urgently) in accordance with the timetable above
  • the Financial Markets Test Case Scheme will apply
  • the second Case Management Conference and final hearing will be live-streamed (details below)

We will publish a copy of the court order and transcript for the hearing once they are available.

Link to live-stream future hearings

The court has agreed to live-stream the second Case Management Conference on 26 June and the final hearing starting on 20 July. The starting time for these hearings can be checked on the final court listing(link is external)after 4.30pm on the day before each hearing.

In order to view these hearings live:

Notice to non-parties in the test case

In accordance with the order of Mr Justice Butcher on 16 June, notice is given that any non-party wishing to make an application under paragraph 2.5 of Practice Direction 51M should make any such application by 5pm on 24 June 2020 on notice to all parties to the litigation, any such application to be returnable at the Second CMC.

View Practice Direction 51M(link is external), a part of the Civil Procedure Rules 1998. ‘Returnable at the Second CMC’ means that any such application will be heard at the second Case Management Conference on 26 June 2020.

Finalised Guidance and Feedback Statement published

We have published Finalised Guidance setting out our expectations for insurers and insurance intermediaries when handling claims and complaints for business interruption policies during the test case brought by the FCA.

We have also published a Feedback Statement summarising the feedback received on our draft guidance published on 1 June 2020.

15 June 2020

Details of first Case Management Conference on 16 June

The first Case Management Conference before a Judge is now confirmed to take place on 16 June from 10.00am (or 10.30am depending on final court listing which can be checked after 4.30pm on 15 June 2020 by clicking here(link is external)) to 4pm. At this hearing, the Judge will be invited to consider our application for expedition and admission to the Financial Markets Test Case Scheme, fix the timetable for the case (including the date for the court hearing in the second half of July) and deal with other procedural matters.

The court has agreed to live-stream this hearing. In order to view the hearing live:

10 June 2020

Start of proceedings in the High Court

We have started proceedings in the High Court and published the court documents  related to this:

  • Claim Form, which is a procedural document initiating legal proceedings and summarising what we are seeking.
  • Particulars of Claim, which is the FCA’s ‘pleading’ in the case, setting out our claim in writing.
  • Representative Sample of Policy Wordings, which are a selection of policy wordings which the FCA believes captures the majority of the key issues that could be in dispute. Read a tracked changes version so that you can see how this document has developed to date from the proposal published on 1 June 2020 (which is also available below).
  • Assumed Facts (or ‘fact patterns’), which are a set of illustrative factual assumptions, for example the nature of the affected business(es), how they were affected by the pandemic and whether they closed entirely or partially (and why). These are a menu of potential fact patterns to assist the court, and not all of the assumed facts will be applied to all of the representative sample of policy wordings. Read a tracked changes version so that you can see how this document has developed to date from the proposal published on 1 June 2020 (which is also available below).
  • Questions for Determination by the court, which are a list of potential questions arising from insurers’ reasons for denying claims, and which have informed the FCA’s Particulars of Claim. Read  a tracked changes version so that you can see how this document has developed to date from the proposal published on 1 June 2020 (which is also available below).
  • Issues Matrix, which shows which questions for determination by the court are engaged by each policy in the representative sample. Read a tracked changes version so that you can see how this document has developed to date from the proposal published on 1 June 2020 (which is also available below).

We have updated the initial list of affected insurers and the policy wordings they use to reflect the changes to the Representative Sample of Policy Wordings. Read a tracked changes version so that you can see how this document has developed to date from the proposal published on 1 June 2020 (which is also available below). As stated in the 1 June 2020 update , this list is not exhaustive, and our expectation remains to publish a list of all the relevant insurers and wordings that may be impacted by the test case in early July.

How we have engaged with stakeholders since 1 June

Since 1 June we have received more than 270 submissions from policyholders and other stakeholders on our proposed Questions for Determination and other documents relating to the scope of the test case that we published on 1 June. We and our advisers, Herbert Smith Freehills, have also conducted more than 45 consultations with policyholders and other stakeholders. We have taken account of the comments we received in formulating our Particulars of Claim and the other documents we published today. In particular:

  • A number of policyholders asked what the judgment in the test case would mean for their claim. We have set out information about this on this website under the heading “What the test case will decide” above.
  • A number of policyholders asked why certain policy wordings were not being tested. The policy wordings we have selected are those which are representative of the key arguable issues on the basis of securing the maximum relevant coverage for relevant policies while minimising the number of parties engaged before the court. This is in order to make the process as swift as possible while providing as much clarity as possible.
  • The comments received from stakeholders have influenced the way the FCA has put its case in the Particulars of Claim, including in relation to certain causation points, what amounts to “prevention” and “interference”, and the correct application of “trends clauses”.
  • We have amended where necessary the documents appended to the Particulars of Claim (Questions for Determination etc, see above).

Application for expedition

We have also published the documents  relating to our application that the test case be heard urgently, and as part of the Financial Markets Test Case Scheme (which is a scheme for financial claims raising issues of general importance that require immediate court guidance):

  • Application Notice, which is a procedural document initiating the application and summarising what we are asking for.
  • Witness Statement, which is the FCA’s evidence in support of the application.
  • Draft Order, which is the order we are asking the court to make in respect of this application.

First case management conference

The first Case Management Conference before a Judge is expected to take place on 16 June (TBC) . The Judge will be invited to consider our application for expedition and admission to the Financial Markets Test Case Scheme, fix the timetable for the case (including the date for the court hearing in the second half of July) and deal with other procedural matters.

We intend to ask the Judge to agree to live-stream this hearing, and will provide a further update on this as soon as we can.

Next invitation to provide comments – c.23 June

We expect to issue a further invitation to policyholders and other stakeholders to provide us with comments shortly after 23 June, when the insurer parties in the test case file their Defences. This will help us ensure that stakeholder comments are reflected in our Reply and skeleton arguments (written submissions) prepared for the final court hearing.

Update to our Policyholder Engagement Statement

We have updated our Policyholder Engagement Statement, including to refer to our privacy notice  for information on how and why we handle any personal data sent to us.

1 June 2020We announced that we have identified the representative sample of policy wordings to be examined in the test case, insurers that use those wordings, and which of those insurers we have invited, and have agreed, to participate in the proceedings.

The initial list of insurers and the policy wordings they use is not exhaustive, and we published a short consultation on draft guidance asking all insurers to check their policy wordings against those we intend to test to see if theirs will be impacted by the outcome of the case. We said our expectation was to publish a list of all the relevant insurers and wordings that may have impacted policies in early July.

The consultation on draft guidance also set out the FCA’s expectations of all firms handling BI claims and any related complaints between now and the court decision.

We also published 4 key documents, which we intend to invite the Court to consider and would therefore form the basis of the test case:

  • Proposed Representative Sample of Policy Wordings, which are a selection of policy wordings which the FCA believes captures the majority of the key issues that could be in dispute. How we arrived at these is explained in the press release
  • Proposed Assumed Facts (or ‘fact patterns’), which are a set of illustrative factual assumptions, for example the nature of the affected business(es), how they were affected by the pandemic and whether they closed entirely or partially (and why). These are a menu of potential fact patterns to assist the court, and not all of the assumed facts will be applied to all of the representative sample of policy wordings
  • Proposed Issues Matrix, which shows which questions for determination by the court are engaged by each policy in the representative sample
  • Proposed Questions for Determination by the court, which are a list of potential questions arising from insurers’ reasons for denying claims, and which will inform the FCA’s Particulars of Claim

Invitation to comment on our documents

We invited policyholders, their insurance intermediaries, insurers, other stakeholders and their legal advisers to provide their comments on these documents by 3pm on Friday 5 June.

We also invited comments on these documents from the insurers who will be the parties to the test case.

Invitation to speak to our legal advisers

We invited policyholders and intermediaries to have consultations with our legal team at Herbert Smith Freehills on 3 and 4 June.

15 May 2020We invited policyholders of BI insurance who are in dispute with their insurers over the terms of their policies to send us their arguments by 20 May 2020 if they wished us to take them into account as part of the test case. In particular, we asked for:

  • policyholders’ (or their representative’s) arguments as to why it was considered cover should be available in cases where it was considered insurers had not responded appropriately to a claim
  • the wording of the policy that has not responded
  • brief relevant facts of the case

We needed policyholders’ arguments urgently in line with the FCA’s intention to seek the court’s view on relevant policies as soon as possible, and we said we would consider all arguments and information raised to us by 20 May 2020. We are taking those arguments into account as part of the test case.

We also provided a link to sign up to receive email updates.

1 May 2020We issued a statement setting out our intention to obtain court declarations aimed at resolving the contractual uncertainty around the validity of many BI claims. We explained we are intending to take this action in the public interest to advance our consumer protection and market integrity objectives, with the aim of obtaining legal guidance more quickly and at lower cost to policyholders than would be the case if they took their own actions.

Alongside our statement, we asked insurance companies for information on their BI policies and wordings, and their intentions and decisions in relation to claims on these policies by 15 May 2020. We are using this information to consider, with external counsel, which policies we will seek to achieve a declaratory judgement on through the courts. We want a representative sample of wordings to give as much clarity as possible, whilst recognising that the need for an expedited court process means we can’t achieve clarity on every different wording. We are not yet in a position to definitively identify which policy wordings, or indeed firms, may be included in proceedings.

15 April 2020We wrote to all chief executives of insurance firms. This Dear CEO letter outlined our expectations of firms with regard to the settlement of BI claims and the need to assess and settle claims quickly.
19 March 2020We set out our expectations for insurance firms. This outlined our expectation that firms should consider very carefully the needs of their customers and show flexibility in their treatment of them.