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On 9 June 2020 the FCA launched High Court proceedings against eight insurers (the Test Case). The FCA sought the court’s guidance on the meaning of certain key words and phrases by reference to a representative sample of policy wordings that do not require damage to the insured’s property in the context of COVID-19 business interruption claims.  The Test Case relates to policies written in England, Wales and Northern Ireland.

The nature and purpose of the Test Case

  • As announced by the FCA, the purpose of the Test Case was to seek to resolve certain key contractual uncertainties and ‘causation’ issues that the FCA intended would provide clarity for policyholders and insurers alike. 
  • The FCA made clear that the Test Case would not determine how much is payable under any individual policies which are held by the court to respond. Such issues would still need to be determined with each insurer. 
  • A trial of the issues in the Test Case concluded on 30 July 2020. During the trial, the FCA put forward policyholders’ arguments on their behalf. The court also heard from lawyers for certain policyholders. The court handed down its judgment on 15 September 2020.
  • Following a consequentials hearing on 2 October 2020 (during which the court made various orders consequential upon the judgment), the FCA, an action group on behalf of various policyholders and certain insurer parties were granted "leapfrog" certificates for an appeal directly to the Supreme Court (without the need to first appeal to the Court of Appeal). 
  • The appeal was heard by the Surpreme Court over 4 days commencing on 16 November 2020 and judgment was handed down on 15 January 2021. A copy of the judgment along with a summary of the findings is available on the FCA website (see details below).
  • Following judgment, the Test Case has now concluded and the questions posed by the FCA finally resolved. The FCA has since published a number of guides to assist policyholders and their advisers in understanding the Test Case, including guidance on how to prove the presence of COVID-19.

ERGO will continue to post regular updates following the conclusion of the Test Case to this website.

Impact of the Test Case on business interruption claims

On 17 June 2020 the FCA issued guidance for insurers and insurance intermediaries in respect of handling claims and complaints for business interruption policies during the Test Case (the FCA Guidance). Although ERGO was not directly involved in the Test Case, it was required to inform the FCA by 8 July 2020 whether, by reference to its own policies, the outcome on claims generally may be affected by the final resolution of the Test Case or whether the outcome will not be affected. 

ERGO has already written to all policyholders who have made business interruption claims where there has been no damage to the insured’s property and where such claims have been declined or remain unresolved as well as policyholders who have made a complaint against ERGO or referred their complaint to the Financial Ombudsman Service following the declinature of a claim by ERGO. In accordance with the FCA Guidance, ERGO has explained whether or not policyholders’ claims or complaints are potentially affected by the final resolution of the Test Case and the implications of that.

In light of the final resolution of the Test Case, ERGO is considering whether claims and complaints from those policyholders that were advised that their claims or complaints are potentially affected by the final resolution of the Test Case are impacted by the Supreme Court's judgment.

ERGO has written to all affected policyholders advising on the status of those claims or complaints in line with the outcome of the Test Case and FCA Guidance.

For further information on the Test Case, you can visit: https://www.fca.org.uk/firms/business-interruption-insurance 

You may wish to subscribe for email updates from the FCA by visiting: https://www.fca.org.uk/sign-business-interruption-bi-insurance-email-updates 

For further information regarding complaints to the FOS, you can visit: https://www.financial-ombudsman.org.uk/businesses/complaints-deal/complaints/coronavirus-covid-19-information-businesses

22 April 2021

Covid-19 Update

Please note that our London and Birmingham offices are currently working with reduced staffing due to Covid-19 restrictions.

However, all staff are available as normal via email.

Read more about the ERGO Group and its broad range of activities at www.ergo.com