COVID-19: Supreme Court judgment in FCA test case on business interruption cover

15 January 2021


The High Court judgment (largely seen to be in policyholders’ favour) in the FCA test case for business interruption cover was delivered in September 2020. The decision was appealed by the Insurers, with the FCA cross-appealing on some issues. The appeal was fast tracked to the Supreme Court and heard in November 2020. Judgment was delivered this morning.

The key clauses considered in this matter were non-damage extensions to business interruption cover. These included notifiable disease and denial of access clauses. Whilst some notifiable disease extensions include a list of diseases covered, others do not. The Supreme Court also considered the issue of causation and the interpretation of “interruption or interference” in the context of an insurance policy.

One issue the Insurers specifically raised in their appeal is the High Court decision in the “Orient Express” case. In that case, the Court held that a policyholder whose hotel was damaged in a hurricane could not satisfy the “but for” causation test. In that case, the Court accepted that the hotel would have suffered the same business interruption losses even if it had not been damaged because of the extensive devastation caused to the area by the hurricane.

The Supreme Court has today upheld the High Court judgment in the FCA test case, dismissing the Insurers’ appeal and ruling substantially in favour of the FCA and policyholders. Interestingly, the Court also held that the ruling in the Orient Express case was wrong.

Insurers will now contact policyholders to make payments accordingly. It is expected that Insurers could end up paying out more than £1.8 billion following this judgment.

If you require advice regarding insurance issues, please do not hesitate to contact John McCloskey or another member of the Defence Insurance Litigation team at Carson McDowell.