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The Supreme Court Ruling in the Covid-19 Business Interruption Test Case: What does this mean for policyholders?

The Supreme Court has today handed down judgment in the Covid-19 Business Interruption insurance Test Case of The Financial Conduct Authority v Arch and Others. The Test Case was brought in order to obtain clarity in relation to insurers' liability for certain claims under a range of sample Business Interruption insurance policies.

Not only did the Supreme Court approve most of the reasoning in the High Court decision, it also drove a coach and horses through the But For test on causation in insurance law. This ruling offers a lifeline to thousands of businesses that have been affected by the pandemic and subsequent government enforced closures.

Although today’s ruling does not completely eradicate the financial strain the pandemic has inflicted on businesses, it certainly helps signal some light at the end of the tunnel. We are now turning our focus to our clients in the retail, sports, manufacturing and healthcare sectors and assessing their policies in light of this landmark ruling, with a view to securing a swift settlement in line with their individual insurance policies.

The final hurdle will be to ensure that businesses with good claims do not jeopardise their position by submitting generic losses that the insurers can challenge. Questions relating to aggregation (the number of limits of responsive insurance cover) and retention (the number of deductibles to be applied to the loss) still have to be addressed. We recommend that businesses seek independent legal and accountancy advice to maximise their chances of a successful claim.

A full copy of the Supreme Court judgment can be accessed here:

The Financial Conduct Authority and others (Appellant/Respondents) v Arch Insurance (UK) Ltd and others (Respondents/Appellant) (supremecourt.uk)

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