The outbreak of COVID-19 coupled with the public health controls put in place by the Government has led to substantial loss to businesses.
If your business has suffered losses as a result of the pandemic you may be able to make a claim on your business interruption (“BI”) policy following the Supreme Court’s ruling in, The Financial Conduct Authority (FCA) v Arch Insurance (UK) Ltd & Ors  UKSC 1 (‘the Test Case’).
Our solicitors can provide comprehensive and thorough guidance in connection with recovering your losses if your claim has initially been refused by your insurer.
If you wish to seek advice or to register your interest in participating in a group action against your insurer, please complete the form below.
As a result of COVID-19 many policyholders whose businesses were affected suffered substantial losses. This led to a large number of claims under BI policies. Whilst some insurers accepted liability, others had disputed liability leading to concern about the lack of clarity and certainty surrounding the wording of policies and their coverage.
On 1 May 2020, the Financial Conduct Authority (“FCA”) announced its intention to bring a test case to clarify the meaning and effect of certain BI insurance policy wordings in light of the confusion surrounding COVID-19 claims.
A consolidated list of the insurers and BI policies that would be affected by the Test Case was published by the FCA which impacted approximately 370,000 policyholders.
The FCA test case
Proceedings were commenced on 9 June 2020 by the FCA, which sought declarations as to the correct interruption of BI policy wordings, pursuant to a ‘Framework Agreement’ between the parties.
The Framework Agreement set out the parties’ mutual objective in seeking clarification for “the maximum policy holders and their insurers, consistent with the need for expedition and proportionality”.
In accordance with the Framework Agreement, 21 sample wordings were considered. The case proceeded under the Financial Market Test Case Scheme under Practice Direction 51M, which allowed the trial to proceed on an expedited basis before the High Court in July 2020. The High Court decision was appealed by insurers, which was put before the UK Supreme Court in November 2020.
On 15 January 2021, judgment was handed down which favoured the FCA’s broader interpretation of sample wording and largely confirmed the High Court’s previous decision. The wordings were grouped into three broad categories:
- Disease clauses which provide cover where a business is interrupted as a result of a notifiable disease.
- Prevention of Access clauses which provide cover where access to a business has been prevented or hindered as a result of government or local authority action or restriction.
- Hybrid clauses which relate to both restrictions imposed on the business’s premises and to the occurrence or manifestation of a notifiable disease.
Whilst the FCA’s interpretation in the majority of the samples reviewed was favoured by the court, it does not follow that the defendant insurers are liable across all 21 samples or that a policy not considered as part of the Test Case will not respond to COVID-19 related losses.
Accordingly, it remains for the individual policyholder to consider how the principles established in the detailed judgment apply to the circumstances and the wording contained in the insurance policy to calculate liability and the loss.
How to make a claim
At Fletcher Day, we are here to support the business communities and individuals we serve who have been financially affected by the pandemic.
We understand that the purse strings are very tight for many businesses at the moment and funding your case might be difficult. We can offer affordable fixed or flexible funding options to assist you in progressing your claim and to suit your business needs, depending on the merits, prospects and value of your claim. In some cases, we may be able to offer a Conditional Fee Agreement (also known as a ‘no win, no fee’). We are also registering interest for claims to be conducted as part of a group litigation action (“GLA”).
We will assist you in obtaining and putting into place an After The Event (“ATE”) insurance policy , which means that if you are unsuccessful in your claim, you will not have any liability to pay your insurer’s legal costs of defending any court action.
If you instruct us to act in your claim, you will receive commercial, impartial, and transparent legal advice and support from approachable insurance litigation specialists, giving you peace of mind and enabling you to concentrate on running your business and avoiding the stress and inconvenience of having to manage your claim.
“Excellent legal advice. If you are looking for a corporate and commercial law firm to act in your best interests, you should speak with Fletcher Day. “– The Legal 500, 2019
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The first port of call should be to make a claim directly with your insurer. Upon completion of a claim form from, the insurer will consider the circumstances surrounding the claim and advise whether they believe it falls within the policy terms.
In the event the claim is refused, you can then consider making a complaint to the Financial Ombudsman (see below) or take steps to issue proceedings (see below).
If your claim has initially been refused you may be eligible to use the Financial Ombudsman’s complaint scheme.
In order to make a complaint you will need to review your policy wording considering the principles set out in the recent judgment. You may wish to seek legal advice as to the correct interpretation of the policy and whether your losses are recoverable.
When submitting a claim, you will be required to provide copies of any correspondence exchanged with your insurer on the issue. Accordingly, copies of all correspondence should be kept along with notes of conversations.
Please note that the complaint procedure will not be appropriate in all claims. Only micro enterprise businesses will be eligible. A micro-enterprise is a business which employs less than 10 people and have an annual turnover or balance sheet that does not exceed 2 million.
There is also a limit on how much the Financial Ombudsman can award, which is capped at £355,000.
Before commencing any action you will be required to send a letter before action to the proposed defendant insurer in accordance with the Practice Direction on Pre Action Conduct and Protocols (‘the Protocol’).
When sending the letter, the court will expect the parties to act reasonably by exchanging enough information and documents with a view of resolving the dispute. The insurer should then be given reasonable time to respond (usually between 14 to 30 days) before making a claim. A failure to comply with the Protocol can lead to issues on costs.
If the potential claim is not resolved by way correspondence, then proceedings will have to follow. In certain circumstances a claim can be brought in the Commercial Court under the Shorter Trials Scheme set out in Practice Direction 57AB. This provides a quicker and cost-effective route to trial and judgement can in circumstances be awarded in a matter of months.
The judgment in the case is complex and those who have been affected will need to review the wording of their policies to establish how the principles set out in the judgment apply.
The commercial dispute resolution team at Fletcher Day can provide advice on the correct interpretation of your business interruption insurance policy and if necessary, make a claim on your behalf.
We can offer a wide range of funding options which include ‘no win no fee’ agreements.
If you need advice or would like to make a claim please submit an enquiry.