The coronavirus pandemic has led to widespread disruption and business closures resulting in substantial financial loss. Many policyholders believe that their respective insurers wrongfully denied claims on their business interruption insurance over the cost caused by the COVID-19 outbreak. To achieve clarity for all concerned, the FCA is taking a representative sample of cases (opens a new window) to court.
The result of the test case (opens a new window) will be legally binding on the insurers that are parties to the test case in respect of the interpretation of the representative sample of policy wordings considered by the court. It will also provide persuasive guidance for the interpretation of similar policy wordings and claims that can be taken into account in other court cases including in Scotland and Northern Ireland, by the Financial Ombudsman Service and by the FCA in looking at whether insurers are handling claims fairly.
The second Case Management Conference on 26th June took over five hours and was presided over by Lord Justice Flaux and Mr Justice Butcher. The key points from the hearing were as follows:
There will be no expert evidence heard on the prevalence of COVID-19 across the UK at the trial. It is expected that insureds will look to rely upon the conclusions from Government and Public Health England sources to prove whether there were instances of COVID-19 within the vicinity of their premises. However, insurers may challenge the accuracy of this data. Insurers have thus far been unable to source an expert to challenge the data presented by the FCA. A further hearing may therefore be required on this data in September should an expert be found who would challenge the Government data.
Philip Edey QC, instructed on behalf of the (HIGA) to advise in cases against QBE and Aviva and Ben Lynch QC on behalf of the (HIG) successfully argued for the inclusion of the groups in the test case. This was on the basis that there would be no duplication in the arguments presented by the groups and their involvement would be limited in terms of the time allowed. Argument was specifically made relating to the ability of the action groups to include skeleton arguments and make oral argument at trial on behalf of the policyholders they represent and whose policies have been included in the FCA example wordings submitted for the Court’s consideration. Flaux LJ considered that there was a ‘strong argument’ for inclusion and any time allowed for arguments made would be carved out from the FCA’s allotted time.
The FCA consented to the intervention of the HIGA and HAG on the basis of fairness and in view of the fact that their involvement would be limited. It was confirmed the groups would work closely with the FCA legal team to ensure that the interventions did not in any way detract from the test case process. The insurers involved in the test case did not consent to the inclusion of the action groups but neither did they oppose the application for intervention.
Henry Hendon on behalf of sole trader and publican Mr Sheehan pursued an application for intervention on behalf of his client. However, the FCA did not agree to the inclusion on the basis that Mr. Sheehan’s policy required there to be damage and the FCA test case specifically intends to address non-damage extensions. To include such a wording would require a significant increase in the argument required before the Court and would not work towards the objective of the test case (a speedy determination on the main areas of policyholder dispute). RSA also opposed the application, which was dismissed.
No party will bring oral evidence at the Trial.
Colin Edelman QC, for the FCA, stressed that the purpose of the test case is not to examine ‘sample cases’ but to determine the law on key principles which will be used to indicate whether there is cover across policy wordings generally.
The FCA will present their case over three days of oral argument; each insurer will have half a day. The Court may work late or start early to accommodate the significant amount of argument that it is likely to need to hear.
Lord Justice Flaux and Mr Justice Butcher will remain on the case throughout and will be the trial judges.
Defences for the insurers involved in the FCA test case have now been released and can be found under the links below:
The FCA expects to publish a comprehensive list of other insurers and many other BI policies in the market that they expect the test case to affect in early July. An eight day court hearing before Lord Justice Flaux and Mr Justice Butcher is scheduled to start on July 20. The intention is to obtain court declarations that resolve the contractual uncertainty around the validity of many BI claims. A judgment from the Court should not be expected for a number of weeks/months after the hearing.
This document is in no way intended to provide legal advice. The recipient of this note should obtain independent legal advice from a suitable practitioner as required. Lockton Companies LLP does not accept any liability with respect to reliance upon the content or accuracy of this note.