The English High Court has handed down a lengthy 150 page judgment which could result in a pay out for many Irish insurance policy holders. The judgement in the COVID-19 Business Interruption insurance test case of “The Financial Conduct Authority v Arch and Others”, which considered 21 lead sample wordings from eight insurers, was handed down on 15 September 2020.
We have been following this case on behalf of our clients who find themselves affected by the wording of insurance policies.
The test case has clarified that the Covid-19 pandemic, the Government and public response were a single cause of the covered business interruption loss, which is a key requirement for claims to be paid even if the policy provides cover. It is important to note that different conclusions were reached in respect of different wordings but that the overall thrust of the judgment was in favour of interpreting clauses in favour of the policy holder. Each case will turn on its own particular working within the insurance policy but a great number should be covered by the 21 sample wordings considered in the Proceedings.
While the case has no binding authority in Ireland it is of persuasive authority and will certainly be considered by the Irish Courts who we suggest are likely to follow it.
The Court provided the following guidance as to the ‘in principle’ operation in respect of each category of wording:
Disease wordings: The insured peril is the interruption or interference with the Business following the occurrence of the disease including via the authorities’ or public’s response. The wordings in issue insured the effects of COVID-19 both within the specified radius and outside it, with the result that the whole of the disease both inside and outside the relevant area has to be stripped out in the counterfactual.
Prevention of access / public authority wordings: the insured peril is a composite one involving three interconnected elements: (i) prevention or hindrance of access to or use of the premises; (ii) by any action of an authority; (iii) due to an emergency / incident which could endanger human life. All three must be stripped out of the counterfactual.
Hybrid wordings: The insured peril is also a composite peril involving (i) inability to use the insured premises; (ii) due to restrictions imposed by a public authority; (iii) following the occurrence of a human infectious or contagious disease. Each of these interconnected elements should be removed from the counterfactual.
The judgment could impact a large number of Irish policyholders, particularly those with Disease or Hybrid wordings similar to those considered in these Proceedings. Those with Prevention of Access / similar wordings may also find themselves with cover if the facts of their particular circumstances satisfy the requirements of their wordings. Clearly time will be needed to fully digest the judgment, but next steps for insureds will include considering (a) if any of the findings are directly (or indirectly) applicable to their wording; and (b) what additional issues will need to be considered to establish and prove a valid claim.
For more information contact Maurice Dockrell >