In a landmark decision, the Supreme Court today issued its eagerly anticipated decision on the BI coverage issues arising out of COVID-19, rejecting insurers appeals and accepting the FCA’s appeal with some restrictions, from the First Instance decision of Flaux LJ and Butcher J.
The key findings in favour of Insureds relate to (i) broader cover under the interpretation of the disease clause (ii) reduced requirements for prevention of access cover which can include partial loss of access and BI cover for partial trading (iii) limitations on the causal link required between BI losses and the occurrence of the disease (iv) limitations on the application of the trends of the business clause to the quantification of BI losses (v) the recovery of pre-trigger losses based on the downturn in business before the imposition of trading restrictions and (vi) overturning the application of the Orient Express Hotels decision to limit BI recoveries based on the post occurrence general reduction in trade, the so-called Wide Area Damage theory of non-coverage.
This is a significant victory for the FCA and the Action Groups who intervened. The judgment is of considerable importance to buyers, intermediaries and sellers of insurance and reinsurance impacted by Covid-19 business interruption losses. Most importantly this decision has broader implications for insurance policy interpretation generally and BI insurance specifically. In respect of the latter, this is the first time that some of these issues have been considered by the Supreme Court. It is also a landmark decision because it makes significant new law on concurrent causation. This decision is also likely to lead to significant s13 Insurance Act 2015 claims for losses caused to insureds as a result of non-payment of their COVID-19 related BI claims.
We will be publishing a more detailed bulletin on the decision next week. In the meantime, you can read the FCA announcement here and the Supreme Court press release here.