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Business Interruption Insurance: High Court rules in favour of agents

The result of a test case over Business Interruption Insurance involving agents has been handed down by the High Court.

It has ruled in favour of the arguments advanced for insurance policyholders by the Financial Conduct Authority (FCA) on the 'majority of key issues'.

The FCA brought the test case against eight insurance companies and the result is likely to affect claims by some 350,000 small and medium sized firms, including hundreds - possibly thousands - of estate and lettings agencies.


The FCA says that although policyholders will be pleased to see the judgement in their favour, the eight defendant insurers are not liable across all the 21 different types of policy wording in the representative sample considered by the High Court.

It says each policy needs to be considered against the detailed judgement to work out what it means for the policyholder and that those with affected claims can expect to hear from their insurer within the next seven days.

Today's judgment is complex, runs to over 150 pages and deals with many issues. There is also a possibility that the insurance companies involved could lodge an appeal.

The FCA argued in court that the pandemic and its consequences, including lockdown, should be treated as a single cause of lost income for policy holders, thus triggering pay outs.

But the insurers asserted that the pandemic and its fallout had to be separated into components. Some of those components would not trigger pay outs.

Many estate agencies are believed to be amongst the thousands of companies disputing their insurers’ interpretations of liability under different Business Interruption policies; most insurers claim such policies do not cover closures forced by pandemics such as Coronavirus.

Agents contacting Estate Agent Today earlier this year said they believed their BI policies covered circumstances where there was an inability to enter and use normal business premises - for example, during the lockdown.

Others told EAT their policies covered issues regarding instructions from national or local government to cease trading - again, relevant to the lockdown, they claimed.

You can see the full details of the judgement here and below is a statement from the FCA.

Christopher Woolard, interim chief executive of the FCA, commented:

"We brought the test case in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims and the wider market.  We are pleased that the Court has substantially found in favour of the arguments we presented on the majority of the key issues. Today’s judgment is a significant step in resolving the uncertainty being faced by policyholders. We are grateful to the court for delivering the judgment quickly and the speed with which it was reached reflects well on all parties." 

"Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, as quickly as possible and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that may not be successful."

"Insurers should reflect on the clarity provided here and, irrespective of any possible appeals, consider the steps they can take now to progress claims of the type that the judgment says should be paid. They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps."

"If any parties do appeal the judgment, we would expect that to be done in as rapid a manner as possible in line with the agreement that we made with insurers at the start of this process. As we have recognised from the start of this case, thousands of small firms and potentially hundreds of thousands of jobs are relying on this."


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