Result of FCA's Business Interruption Test Case

15 Sep 20

Many businesses, including sailing clubs and Recognised Training Centres (RTCs), were negatively affected by the Covid-19 pandemic and suffered significant losses, resulting in large numbers of claims under Business Interruption (BI) policies. 

The FCA recognised that many thousands of businesses had genuine doubts over the basis on which some insurance companies were making decisions and rejecting claims against the policy.  Therefore the FCA sought a Court Declaration, based on a representative sample of the most common policy wordings, in order to resolve the contractual uncertainty around the validity of many BI claims.

While different conclusions were reached in respect of each wording, the Court found in favour of the arguments advanced for policyholders by the FCA on the majority of the key issues, in particular in respect of coverage triggers under most disease and ‘hybrid’ clauses, certain denial of access/public authority clauses, as well as causation and ‘trends’ clauses. The judgment should therefore bring welcome news for a significant number of policyholders impacted by Covid-related business interruption losses.

Although the judgment will bring welcome news for many policyholders, it does 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 the detailed judgment to work out what it means for that policy. Policyholders with affected claims can expect to hear from their insurer within the next 7 days.

Mandy Peters, RYA Legal Manager, said: “Whilst on the face of it this is welcome news for many of the RYA’s affiliated clubs and RTCs that purchased BI before the pandemic in the good faith that their business would be insured against such unprecedented closures, the devil is in the detail and the judgment needs to be considered alongside the specific wording of the policies concerned.   

“Covid-19 has caused substantial financial and emotional distress to many of the organisations within our sector. The RYA recommend that clubs and RTCs with BI insurance contact their insurers to discuss the impact of the judgment on their claim.”  

More information can be found on the FCA website

The FCA’s legal team at Herbert Smith Freehills have published a summary of the judgment on its website, which provides further detail on the Courts ruling. 

It is possible that the judgment will be appealed. The 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 Supreme Court (rather than needing to be heard by the Court of Appeal first). 

If your club/RTC has any questions regarding business insurance, then please contact the Legal Team on 023 8060 4223 or You can also find further legal guidance on the Legal Advice hub page.