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COVID-19 Test Case

The FCA test case involving a select number of insurers began in the Supreme Court this week, with the outcome to provide some clarity over COVID-19 related claims.

It comes as no surprise that insurers are relying on the Orient Express case, which applies the business trends clause which uses the ‘but for’ test. This looks at the hypothetical position the insured would be in ‘but for’ the insured peril that caused the damage had not occurred. The hotel in question was damaged as a result of hurricane that swept through New Orleans and liability was accepted for the physical damage caused as a result of the insured peril (hurricane), though was denied for the consequential loss of income as ‘but for’ the physical damage had not occurred, it would not have been doing any business as the city had been evacuated and so the loss was minimal.

Business Interruption is one of the most complex and contentious areas of insurance, and although the outcome will provide resolution on some generic policy wording issues, establishing the basis upon which to calculate ‘quantum’ will not be easy.

However, the decisive action taken by the FCA on behalf of policyholders and the co-operation of insurers in order seek redress and resolution in an expediated fashion has been commendable.

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Johnson Insurance Services is a trading name of Johnson Insurance Services Ltd which is authorised and regulated by the Financial Conduct Authority (FCA) under firm reference no. 784664. Johnson Insurance Services Ltd is registered in England & Wales no. 10822509 at Tower House, Fishergate, Yok, Y010 4UA