The FCA argued that the pandemic and its consequences, including lockdown, should be treated as a single cause of the lost income. The case opposed eight insurance companies, with a likely effect on claims by some 350,000 small and medium-sized firms, including estate and lettings agencies.
The judgment and beyond
Whilst complex and running over 150 pages, the judgment deals with many issues, a summary of which can be found here. In order to establish liability under the sample of policy wordings, the FCA argued for policyholders that the ‘disease’ and/or ‘denial of access’ clauses provide cover in the circumstances of the COVID-19 pandemic and that the trigger for cover caused policyholders’ losses.
The judgment said that most, but not all, of the disease clauses in the sample provide cover. Additionally, certain denial of access clauses in the sample provide cover, but this depends on the detailed wording of the clause and how the business was affected by the Government’s response to the pandemic, for example, whether the business was subject to a mandatory closure order and whether the business was ordered to close completely.
Most insurers claim such policies do not cover closures forced by pandemics and could lodge an appeal, asserting the pandemic and its fallout had to be separated into components, with some not triggering payouts.
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 the next steps.
Today’s result is welcome news for those who have been financially disadvantaged through no fault of their own and brings much needed clarity to policyholders and businesses suffering from financial strain due to the COVID-19 pandemic. It is important that each policy is now considered rapidly as a number of livelihoods depend on this.
