Herbert Smith Freehills (HSF) has ensured victory for the Financial Conduct Authority (FCA) in a landmark test case intended to provide clarity on whether companies have valid business disruption insurance claims as a result of the Covid-19 pandemic.
The High Court judgment handed down this morning (15 September) by Lord Justice Flaux and Mr Justice Butcher will be a heavy blow to insurers, with tens of thousands of businesses now potentially in line for payouts on their business interruption policies.
HSF fielded global insurance and disputes head Paul Lewis on the matter, while Mishcon de Reya teamed up with litigation funder Harbour to represent the Hiscox Action Group. Allen & Overy, Clyde & Co, DAC Beachcroft and DWF were among those to advise the eight defendant insurance companies on the case. Meanwhile, HSF instructed Colin Edelman QC of Devereux Chambers, as well as Leigh-Ann Mulcahy QC and Richard Coleman QC of Fountain Court Chambers.
While the decision provides some needed clarity, the insurance industry is expected to appeal the decision, meaning business owners will still face uncertainty. The outcome could affect up to 370,000 business interruption policies across a number of sectors.
Commenting on the decision, Christopher Woolard, interim chief executive of the FCA, said: ‘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.’
HSF’s Lewis commented: ‘This is a really significant judgment. It brings guidance to how business interruption insurance wordings should operate in the context of the Covid-19 pandemic, which has had such a devastating effect on businesses across the country. The decision should bring welcome news to a significant number of policyholders who will need to read the judgment carefully and see how the principles laid down by the court apply to their particular policy wording. The speed with which the proceedings were brought is testament to the hard work of the FCA, Herbert Smith Freehills and counsel teams to bring this urgent case to the courts.’
