Business interruption insurance – where are we now?
As the Government's lockdown restrictions begin to ease in many areas and businesses start to make plans about re-opening if they haven't done already, many business interruption insurance claims remain unresolved.
Businesses have typically sought to argue they should be indemnified where a policy provides cover in respect of an outbreak of an infectious or notifiable disease or where a policy contains a 'non-damage, denial of access' (NDDOA) extension of cover. Business interruption (BI) policies have long covered the situation where a business is closed by reason of fire or flood but NDDOA extensions cover situations where physical damage has not occurred but the business has been closed by reason, for example, of a competent authority ordering a business to do so.
The Financial Conduct Authority has intervened and taking a test case to the High Court with the aim of resolving some of the uncertainties regarding contractual interpretation. Eight insurers have been named as Defendants and a selection of 17 policy wordings have been chosen to be considered from an initial 500 wordings reviewed. The 17 policies selected are considered to be representative of the main issues in dispute.
The FCA has published on its website its Particulars of Claim against the eight named insurers taking part in the test case. The Particulars of Claim detail no less than 18 separate declarations sought from the Court on interpretation and application of the selection of wordings.
If as a result of the test case, it is determined that losses arising out of Coivd-19 related closures are covered, then further questions will arise as to the cause and extent of the losses the insurer is liable to indemnify.
In other words, some policies purport to provide cover where there has been an outbreak of a notifiable disease within a certain radius. The question then is whether the outbreak within that radius caused the business to suffer loss and if so, to what extent. Assessing those losses in particular cases is of course beyond the scope of the test case, so although the FCA intervention is of course welcomed and (it is hoped) will provide some clarity, the disputes will not end when the Court hears the case, which is intended to take place at the end of July.