The Financial Conduct Authority v Arch and Others [2020] EWHC 2448 (Comm) - Business Interruption Coverage

On the 9th June 2020, the FCA issued proceedings under Practice Direction 51M  - the Financial Markets Test Case Scheme seeking judicial determination of the scope and meaning of sample insurance wordings to determine Business Interruption policy coverage. 

Eight insurer defendants, Arch Insurance (UK) Limited, Argenta Syndicate Management Limited, Ecclesiastical Insurance Office Plc, Hiscox Insurance Company Limited, MS Amlin Underwriting Limited, QBE Limited, Royal & Sun Alliance Insurance Plc, and Zurich Insurance Plc agreed to participate. The FCA represented the interests of policyholders, who were mainly small to medium sized businesses. 21 sample wordings were considered, but the FCA estimated that 700 types of policies, underwritten by 60 insurers, and held by 370,000 policyholders could be affected by the outcome of the case.

In summation, the Court agreed with the FCA's interpretation of many of the sample wordings, and disagreed with the Insurers' reliance on Orient Express Hotels Ltd v Assicurazioni Generali SpA [2010] EWHC 1186 (Comm) in respect of the question of causation. 

As matters stand, the case is likely to have a substantial impact upon the ability of policyholders to recover under their Business Interruption Policies. There is of course the possibility of a "leapfrog appeal" being made to the Supreme Court. The Interim Chief Executive of the FCA, Christopher Woolard commented: 

Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful.

‘Insurers should reflect on the clarity provided here and, irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgment says should be paid.  They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.

‘If any parties do appeal the judgment, we would expect that to be done in as rapid a manner as possible in line with the agreement that we made with insurers at the start of this process. As we have recognised from the start of this case, thousands of small firms and potentially hundreds of thousands of jobs are relying on this.’