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Ask the NHBF | Business interruption insurance test case ruling in favour of policy holders

September 16, 2020

The Financial Conduct Authority (FCA) brought a test case to the High Court which has last week, ruled in favour of the policy holders.  The FCA has previously stated that the majority of business interruption customers are not covered for coronavirus.  But there has been a dispute over some policies which contained wording which was not clear.

The FCA selected a representative sample of policy wordings issued by eight insurers, which covers around 370,000 policy holders. The judgement found that most, but not all, of the disease clauses in the sample do provide cover. Unless the decision is successfully appealed by the insurers, the judgement is legally binding on the eight insurers who were part of the test case.

The judgment is therefore welcome news for some policyholders who will hear that they are entitled to compensation from insurance, which would return them to the position they would have been in had the pandemic never happened.

But the 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 will need 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.

Hilary Hall, NHBF chief executive said “We welcome this ruling in favour of those whose policies should have covered them for coronavirus. But we are warning Members that the majority of business interruption policy holders are not affected by this ruling.  Even those who have policies with the insurers included in the test case may still not be covered as the ruling did not find in favour for them all. The decision is also likely to go to appeal so there may not be any immediate pay-outs.”

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