16 September 2020

FCA High Court Test Case - Judgment

By Richard Graham
Executive Summary

This morning, the High Court handed down the much-awaited judgment on the well-publicised legal case by the FCA against a number of insurers.

The judgment is complex and runs to over 150 pages and therefore will take a little time to fully review and digest, however it is clear that the Court has, in the main and broadly speaking, agreed that a number of policies do provide insurance cover for Business Interruption losses as a result of COVID-19.

The judgment should bring welcome news for a number of our clients that have been heavily impacted by COVID-19 and once we fully understand the implications of the judgment we will contact each of our affected clients to provide more information. If you think you have been affected and have not contacted us yet, please get in touch with your usual Aston Lark contact.

The judgment does not provide any sweeping and general conclusions (applicable to all of the sample wordings involved) and we will therefore need to carefully review each page of the judgment to fully consider the coverage position under each of the included wordings. We will seek to complete this review at the very earliest opportunity.

Pleasingly, the Court has ultimately viewed these policies objectively and has applied the stance of deciding on whether a policy does or does not cover COVID-19 based on what is written and what a reasonable person would have understood the parties to have meant by the language used.


The FCA Test Case considered 21 sample wordings from eight insurers. These wordings were identified and included in the Test Case mainly due to the existence of certain Non-Damage Denial of Access / Public Authority Clauses as well as specific Infectious Disease Extensions.

Whilst only 21 sample wordings were specifically included, the FCA estimates that there are 700 types of policies across 60 different insurers and 370,000 policyholders that could potentially be affected by the Test Case.

The 8-day court hearing commenced on the 20th July and concluded on the 31st July.

A list of the 21 sample wordings are provided here.

Headline Summary

Whilst the Court has ruled that most of the policies respond to COVID-19, the insurance industry still needs to apply the judgement to a number of differing factual circumstances (in terms of how clients were impacted by COVID-19). For example, some of our clients were ordered to close as a direct order of the UK Government and others not.

The judgment did not say that the eight defendant insurers are liable across all of the 21 different types of policy wording contained in the sample and made it clear that each policy needs to be considered against the detailed judgment for any client to understand if they have an insurable loss.

In their judgment, the High Court provides a different outcome for clients based upon two different scenarios in some instances (dependant on the policy wording applicable). These are two examples amongst many, hence the need to spend time to fully digest the judgment and consider the implications for each of our clients.

For the sake of the Test Case, the categories of business listed here were considered (in terms of impact and guidelines).

Next Steps

We anticipate that one or more of the insurers will appeal the decision / judgment. In fact, insurers have already asked for more time to put in an application for permission to appeal. Any appeal does not stop our clients seeking to settle their claims with their insurer (i.e. before the outcome of any appeal is known).

As we advised in our most recent communication, we do expect that any appeal will jump from the High Court directly to the Supreme Court, which should ensure that the pace at which this case has been dealt with to-date is maintained.

In the interim, we expect the FCA to set guidelines / deadlines for insurers to communicate with affected policyholders following the judgment, although such guidelines may be altered if and when insurers mount an appeal.

A hearing will be fixed with the High Court where any applications for appeal will be made. The FCA will publish the hearing date and details on their website.

Additionally, the FCA has invited policyholders (and / or your representatives) and Aston Lark to speak directly with their legal advisors. Requests need to be made to the FCA by 5pm on Thursday 17th September.

Please email [email protected] stating only the word ‘Meeting’ in the subject line of the email and stating your availability in the body of the email.

For full details of the FCA’s most recent update, please see here.

You may also wish to subscribe for email updates from the FCA – see here.

If you have any questions, please do not hesitate to get in touch with your usual Aston Lark contact.

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