The test case brought by the Financial Conduct Authority, FCA v Arch Insurance & Ors [2020] EWHC 2448 (Comm), will make it easier for thousands of businesses to make a business interruption claim. The court set out the order of circumstances as the pandemic unfolded and considered policy coverage and the correct construction of terms in relation to various specimen wordings and illustrative scenarios.
Michael Frisby, partner at Stevens & Bolton, said the judgment ‘provides clear guidance to identify which claims are covered in the wake of the pandemic.
‘It will have the effect of reducing the disputes over coverage arising from the pandemic, and should also help resolve some individual disputes. For insurers, the importance of this case is clear when you look at the numbers: it’s been estimated that members of the Association of British Insurers will pay out £1.2bn in the wake of COVID-19 and 75% of this will be for Business Interruption.’
Frisby praised the financial regulator for ‘acting speedily and effectively’ on the issue.
‘For the insured, without the FCA, they would have been left to fight an expensive, lengthy and complex dispute on their own to obtain resolution of the issues raised,’ he said.
‘Small enterprises with little funds or litigation experience were pitted against deep-pocketed and experienced insurers. But the FCA stepped up to the plate. By representing these smaller businesses, there was an equality of arms between claimant and defendant.’
Devonshires partner Stephen Netherway said the judgment ‘gives a much needed lifeline to struggling businesses across the UK and could prevent many from going bankrupt.
‘It provides for many a basis for presenting their COVID-19 business losses under their commercial insurances.’
