The UK High Court’s judgment clarifies the legal position of COVID-19-affected businesses filing business interruption claims
Mishcon de Reya (Mishcon) has helped to score a win for policyholders in a business interruption insurance test case brought by the Financial Conduct Authority (FCA) before the UK High Court to clarify the legal position of COVID-19-affected businesses filing claims.
As discussed by Insurance Business Canada, most businesses with business interruption insurance policies that were forced to shut down as a result of COVID-19 are entitled to compensation from insurers, the court determined on Tuesday. Moreover, depending on the terms of the policies, the compensation amount should be adequate to restore businesses to their pre-COVID-19 positions.
The court proceedings were held over eight days at the end of July. The FCA made submissions, as did policyholder action groups Hospitality Insurance Group Action and Hiscox Action Group (HAG), which Mishcon represented.
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The insurers acting as defendants in the test case were Arch Insurance (UK) Ltd, Argenta Syndicate Management Ltd, Ecclesiastical Insurance Office Plc, MS Amlin Underwriting Ltd, Hiscox Insurance Company Ltd, QBE UK Ltd, Royal & Sun Alliance Insurance Plc and Zurich Insurance Plc.
“The result is legally binding on the eight insurer defendants to the test case in respect of the policies considered. It will also provide persuasive guidance for the interpretation of similar policy wordings and so directly impacts the resolution of many more claims underwritten by many more insurers who were not involved in the test case, and beyond those specific wordings considered in the test case,” Mishcon said in a statement.
The 400-strong HAG applauded the judgment, which translates to a milestone victory for up to 370,000 UK businesses.
“We led this campaign and our stance has been fully vindicated by the court. The most important thing now is that the insurers accept this ruling and start to pay out rather than embark on a fruitless appeals process that will just cause more suffering for the very policyholders they were meant to protect,” said HAG steering committee member Mark Killick.
Mishcon has begun communicating with insurer Hiscox Insurance on providing immediate interim payments to a number of clients while the full extent of losses is determined.
“Today’s High Court judgment is a landmark ruling for many thousands of business who are struggling to survive the impact of the pandemic. It’s also very good news for our clients, who have led this fight and for whom we are now seeking an immediate interim payment,” said Mishcon partner Richard Leedham, who acted for HAG.
The firm also looks to expedite the arbitration and facilitate a quick resolution.
Interim FCA chief executive Christopher Woolard said that the ruling was “a significant step in resolving the uncertainty being faced by policyholders.” While he acknowledged the potential for the ruling to be appealed, he said that insurers should take the judgment into account as they liaise with policyholders on how business interruption claims should be progressed.
The FCA was represented by Herbert Smith Freehills.
Mishcon said that the court would be hearing “appropriate declarations to be made in light of its findings” in an October proceeding.