Follows Aug. 2020, FCA statement deductions re government support, see #83361.
Insurers Should Reflect
Insurers should reflect on clarity provided in the ruling and irrespective of any appeals, consider steps they can take now, to progress claims of the type that should be paid.
FCA highlighted that insurers should also communicate directly and quickly with their policyholders, who have made claims affected by the judgment, to explain next steps.
Types of Insurance Cover
Many policyholders whose businesses were affected by Covid-19 suffered major losses.
Losses resulted in a large numbers of claims under business interruption (BI) policies.
Most SME policies are focused on property damage, and only have basic cover for BI.
Some cover BI from infectious / notifiable diseases (disease clauses) and non-damage denial of access and public authority closures or restrictions (denial of access clauses).
FCA Aim of Test Case
In some cases, insurers accepted liability, in others, insurers disputed coverage scope.
Mixed responses lead to widespread concerns, about the lack of clarity and certainty.
FCA aimed to urgently clarify issues of contractual uncertainty for as many as possible.
They selected a representative sample of policy wordings, as issued by eight insurers.
FCA put forward policyholders’ arguments, to their best advantage in public interest.
370,000 policyholders were identified as holding policies that may be affected by case.
High Court Judgement
High court judgment is complex, runs to over 150 pages, and deals with many issues.
FCA sought to establish liability, under the representative sample of policy wordings.
The FCA argued for policyholders that the ‘disease’ and/or ‘denial of access’ clauses in the representative sample of policy wordings provide cover in the circumstances of the Covid-19 pandemic, and that the trigger for cover caused policyholders’ losses.
Judgment says that most, but not all, of disease clauses in the sample provide cover.
It also says that certain denial of access clauses in the sample provide cover, but this depends on detailed wording of the clause, and how a specific business was affected.
Includes if a firm subject to mandatory closure order, was ordered to close completely.
Clarified that Covid-19 pandemic and Government and public response, were a single cause of covered loss, a key requirement for claims to be paid even if policy covers.
Policyholders
Judgment did not say that the eight defendant insurers are liable across all of the 21 different types of policy wording in the representative sample considered by the court.
Each policy needs to be considered against judgment, to work out impact on a policy.
Policyholders with affected claims can expect to hear from insurers within next 7 days.
Next Steps
FCA and insurers are considering judgment and what it might mean in case of appeal.
Any applications to appeal, will be heard at consequentials hearing before High Court.
FCA and defendant insurers have agreed that they will seek to have any appeal heard on an expedited basis, given the importance of the matter for so many policyholders.
This includes exploring the possibility of any appeal being a leapfrog appeal to the UK Supreme Court, rather than needing to be initially heard by the UK Court of Appeal.
FCA will keep policyholders updated of matters as they progress, via specific webpage.
In some cases, insurers will feel judgment gives them clarity to conclude their claims processes with their customers, FCA encourage these to do so as quickly as possible.
In other cases, may decide to wait to understand if a specific point will be appealed.
Expect insurers to write to policyholders by Sep. 22, 2020, being clear on next steps.
Important insurers reassess, settle claims quickly, making interim payments wherever possible where legal process is complete or claim has been accepted in full or in part.
Expect all insurers to take a pragmatic, transparent and consistent approach to their interactions with policyholders over any remaining evidence re individual claims.
Includes evidence for proximity and prevalence for disease coverage clauses.
Will publish additional information to help policyholders and insurers with the process of providing and assessing appropriate evidence on proximity and prevalence.
Where wordings affected by test case, and relevant questions are subject of an appeal, expect insurers to continue to progress claims of type judgment says should be paid.
So they are as progressed as possible when any appeal judgment is handed down.
Covered deductions some insurers have made for some types of Government support.
Consequentials hearing will take place on Oct. 2, 2020, to hear submissions on the appropriate declarations to be made by the Court and on any applications for appeal.
Sep. 25, 2020 Update
On Sep. 25, 2020, UK FCA updated guidance page on business interruption insurance.
Following hundreds of requests, held meetings with policyholders, other stakeholders.
Set out various deadlines in relation to any potential appeal against the judgement.
Highlighted that the test case was not intended to encompass all possible disputes.
Was to resolve some key contractual uncertainties / causation issues to provide clarity.
Does not determine how much payable under individual policy, provides basis to do so.
Sep. 29, 2020 Supreme Court
On Sep. 29, 2020, UK FCA issued update on business interruption insurance appeals.
Deadline for parties to file a leapfrog application to appeal to the Supreme Court any aspects of the High Court’s Judgment was yesterday, Monday, Sep. 28, 2020.
FCA confirmed that it has filed a leapfrog application to appeal to the Supreme Court.
FCA's intention has been to achieve clarity on affected BI policies at speed.
Believes that clarity was provided in the initial judgment handed down on Sep. 15.
FCA therefore continues to work closely and at speed with the eight insurers and two intervenors that participated in the test case to reach an agreement in principle.
FCA's leapfrog application has been filed on a precautionary basis in the event that this agreement is not reached by close of business Sep. 30, 2020; FCA understands that seven insurer parties have made similar precautionary applications.
Sep. 30, 2020 FCA High Court Filing
On Sep. 30, 2020, UK FCA updated guidance page on business interruption insurance.
On Friday Oct. 2, Court will hear submissions from the parties on the declarations to be made by the Court, in the light of the judgment and on applications for appeal.
FCA published skeleton arguments (written submissions) for consequentials hearing.
Objective has been to achieve clarity for everyone involved, as quickly as possible.
Initiated test case with 8 insurers, whose policies are representative of broader group.
Had hoped to reach an agreement with the insurers by now, on the interpretation of some important elements of the judgment, affecting which small businesses get paid.
This would have allowed for faster pay-out for policyholders that have eligible claims.
However, FCA recognizes that this case has always involved complex issues; and have now filed skeleton argument with High Court in attempt to clarify some of these points.
Will continue discussions with insurers and action groups, to find a solution which resolves outstanding issues as soon as possible to enable pay-outs on eligible claims.
FCA will ask the Court to give a certificate to apply to leapfrog to the Supreme Court
Leapfrog to Supreme Court is the fastest way to get legal clarity as quickly as possible, in the event that it is not possible to resolve outstanding issues in the coming weeks.
Oct. 2, 2020 Outcome of Consequentials Hearing
On Oct. 2, 2020, UK FCA updated on the outcome of the consequentials hearing.
Lord Justice Flaux and Mr Justice Butcher made various orders consequential on ruling.
Including declarations on effect of judgment, FCA will publish as soon as available.
High Court granted leapfrog certificates for an appeal to the Supreme Court to the FCA and 7 insurers, while 1 insurer withdrew its leapfrog application before the hearing.
Oct. 6, 2020 Draft Transcript
On Oct. 6, 2020, UK FCA issued draft transcript of consequentials hearing on Oct. 2.
Oct. 20, 2020 High Court Declarations
On Oct. 20, 2020, UK FCA published the High Court declarations made in the test case.
Are the culmination of test case judgment and declare how and to what extent policies in representative sample, respond to business interruption losses from the pandemic.
The FCA expect to publish shortly, a guide to the declarations for policyholders.
Policyholders are encouraged to speak to their insurance intermediaries and/or their advisers in the first instance, for questions they have arising from the declarations.
Policyholders should note that the FCA, six defendant insurers and the Hiscox Action Group have applied to appeal the High Court judgment and declarations.
Have also published: final transcript of the Oct. 2 hearing; the order of Oct. 2 which, amongst other matters, granted certificates for a leapfrog appeal to Supreme Court.
Are continuing discussions with insurers and action groups, to find a solution which resolves outstanding issues as soon as possible to enable pay-outs on eligible claims.
In parallel, FCA, 6 defendant insurers and Hiscox Action Group have applied to appeal.
Believe that this leapfrog appeal is the fastest way to get legal clarity as quickly as possible for all parties if it is not possible to resolve the outstanding issues.
We have published the FCA’s application to appeal to the Supreme Court; and have also published applications from the 6 appellant defendants and Hiscox Action Group.
On Nov. 2, 2020, UK FCA issued update on Supreme Court appeal hearing.
The appeal will be heard from Monday, Nov. 16, and is expected to last for 4 days.
The appeal hearing will be by video link; as previously stated, FCA believe that this leapfrog appeal to the Supreme Court is fastest way to get legal clarity for all parties.
As Royal & Sun Alliance Insurance Plc has confirmed it will not be appealing the High Court's judgment in respect of the RSA4 wording, Hospitality Insurance Group Action has confirmed that it will not be seeking to intervene in the Supreme Court appeal.
Nov. 4, 2020 Policyholder Documents
On Nov. 4, 2020, UK FCA issued update on publication of documents for policyholders.
To assist policyholders and other stakeholders in understanding High Court judgment, High Court declarations and test case, generally, the FCA have issued the following.
A table setting out the appeal status and the most relevant declarations and paragraphs of the judgment according to policy type in the representative sample.
The representative sample of policy wordings with a contents page, which can be navigated to by clicking on policy type in the table above (there is no other change).
A contents list for the High Court judgment; none of these publications contain any new information, but they are intended to aid navigation of the court documents.
They are not definitive or legally binding; policyholders are again encouraged to speak to their insurance intermediaries and/or their advisers in first instance for questions.
Nov. 11, 2020 Update
On Nov. 11, 2020, UK FCA said Supreme Court will live-stream appeal, on Nov. 16-19.
Agreed Statement of Facts and Issues which sets out the history of Covid-19 and the government response, the background to proceedings, and the issues being appealed.
Directions agreed between parties re steps leading up to hearing, procedural matters.
Nov. 16, 2020 Update
On Nov. 16, 2020, UK FCA said parties agreed running order for supreme court appeal.
Court issued hand out summarizing issues, facts, procedural chronology and counsel.
Nov. 18-20, 2020 Draft Transcripts
On Nov. 20, 2020, UK FCA updated on progress of Supreme Court appeal hearing.
On Nov. 18, 2020, published draft transcript of day 1, link to watch video of hearing.
On Nov. 19, 2020, published draft transcript of day 2 of Supreme Court hearing.
Appeal hearing now ended, Lord Reed recognized importance of an early judgment.
Justices would do what they could to provide judgment as quickly as possible, but could not comment on whether that would be before Christmas or in January.
Court intends to keep parties informed, FCA will update webpage as soon as it can.
On Nov. 20, 2020, published draft transcript of day 3 of the Supreme Court hearing.
Nov. 23, 2020 Draft Transcripts
On Nov. 23, 2020, UK FCA issued draft transcript of day 4 of Supreme Court hearing.
On Dec. 15, 2020, UK FCA issued update stating they had been informed by Supreme Court that it will not be in a position to hand down the judgment before January 2021.
Jan. 12, 2021 Timing of Judgment
On Jan. 12, 2021, UK FCA stated the Supreme Court will deliver judgment on Jan. 15.
