January 15, 2021

Update on FCA Test Case: 15 January 2021

Arch Communications

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On 15 January 2021 the UK Supreme Court handed down its judgment in the COVID-19 Test Case. 

The Test Case began last June, when the FCA and eight insurers, including Arch, agreed to participate in legal proceedings to clarify how various sample policy wordings applied to claims arising from the COVID-19 pandemic. The purpose of the case was to resolve uncertainty and achieve the maximum clarity for the maximum number of policyholders.

The sample wordings were chosen to be representative of those in the market.  They provide coverage for:

  • Infectious and notifiable diseases (except where the policy contains a list of diseases).
  • Official actions or advice which affect a policyholder’s ability to access or use the insured premises.

The Test Case did not consider:

  • Policies which insure only damage to property.
  • Policies which insure only a closed list of diseases.
  • Policies which insure only diseases occurring at insured premises.
  • Causation issues specific to loss of rent claims.
  • The quantification of claims.

The High Court gave judgment in September 2020.  Various appeals were made, and an expedited Supreme Court hearing took place in November.  Following the Supreme Court’s judgment, the Test Case is now at an end.  There will be no further appeals.

The Supreme Court’s judgment departs significantly from the judgment of the High Court.  It also overrules an earlier High Court decision upon which many insurers had relied.  As a result of the judgment, a number of the sample wordings, including some issued by Arch, have been found to respond to claims arising from the COVID-19 pandemic.

Arch will now review all outstanding claims and complaints in order to give effect to the judgment of the Supreme Court.  Policyholders with affected claims should expect to hear from us very shortly.

Full details of the Test Case are available on the FCA website, where you can also register for email updates: https://www.fca.org.uk/firms/business-interruption-insurance.