COVID-19 Business Interruption Test Case delivers positive result to policyholders

Judgment was delivered in the United Kingdom on 15 September 2020 in the highly anticipated test case regarding business interruption claims emanating from the COVID-19 Pandemic.

The case was brought on behalf of policyholders by the Financial Conduct Authority on behalf of policyholders, against insurers AIG, Arch, Hiscox, Royal & Sun Alliance, QBE and Zurich.

The London High Court examined over 21 property policy wordings and came to different conclusions on each. Summarily some policyholders will be covered for business interruption, in particular, under extensions not requiring “damage” for the policy benefit to trigger. Such extensions may include cover for “denial of access” and “infectious diseases”.  The guidance in the Judgment on each policy form will be helpful in determining each insured’s entitlement to cover under their respective policies.

Otherwise the Australian version of the ‘test case’, run jointly by the Insurance Council of Australia and the Australian Financial Complaints Authority, ought to have considerations to the UK Judgment. Bellrock will stay across the determination as the test case evolves in Australia.

At first glance, this is a win for insureds and provides clarity for insurers on some very complex issues. As per our previous articles however, we anticipate that losses of this nature were not intended to be covered by insurers under “property” policies. On that basis loss ratios already impacted will further suffer in the wake of this decision. The overall impact will be a further uplift in already high property premiums.

A copy of the judgment may be found here.