The Covid-19 pandemic has led to widespread disruption, business closures and resulting financial loss, particularly for many small to medium sized enterprises (SMEs). The bulk of SME insurance policies only provide basic business interruption (BI) cover resulting from physical property damage. However, some policies extend to cover BI for other causes, such as infectious or notifiable diseases (‘disease clauses’) and non-damage related denial of access and public authority closures or restrictions (‘denial of access clauses’). Whilst in some cases, insurers have indemnified their policyholders, in other cases insurers have refused to accept cover leading a lack of clarity and certainty.
As a result, the Financial Conduct Authority (FCA) announced in May 2020 that it would bring a test case in the High Court of England and Wales to seek clarity and fairness via a "timely, transparent and authoritative judgment".
Following an expedited eight-day hearing conducted via Skype in July 2020, the court has now delivered its ruling (available here) with some potentially positive news for those with the benefit of BI policies with 'disease or denial of access' cover.
The High Court considered some 21 different policy wordings and in a lengthy and complex judgment has, in the majority of instances, ruled in favour of the wider interpretations argued for by the FCA on behalf of SME policy holders and against the much narrower interpretations suggested by insurers.
Although this case makes it obvious that there is no 'one size fits' all answer, the Court's guidance will be welcomed by many policyholders, particularly those with disease or denial of access wording similar to that considered in this important test case.