On 9 June 2020, the Financial Conduct Authority issued declaratory proceedings with Claim Number FL-2020-000018 in the High Court of England and Wales to commence a test case in respect of business interruption ("BI") policies that provide cover where there has been no physical damage to the insured property (a "Non-damage BI Policy") (the "Test Case"). The aim of the Test Case was to resolve uncertainty as to whether Non-damage BI Policies respond to claims related to the COVID-19 pandemic.
The Test Case sought to resolve issues of coverage in relation to ‘disease’ and ‘denial of access’ clauses and causation. The Test Case was not, however, seeking to resolve:
- coverage issues relating to clauses that have an exhaustive list of diseases which do not include COVID-19;
- coverage issues relating to clauses which require the disease to be present on the insured premises;
- issues concerning mis-selling of policies; or
- other issues flowing from the determination of the questions in the Test Case such as aggregation, additional causation issues specific to loss of rent and similar claims under a property owner’s policy, and the specific quantum of any particular claims.
The FCA involved eight insurers as parties in the Test Case, which considered a sample of 21 Non-damage BI Policy wordings that are representative of those used by the insurance industry in the UK. Although LMIE was not a named party in the Test Case, it supports the FCA’s aim to achieve clarity for all concerned.
Following hearings in the High Court in July 2020 and the Supreme Court in November 2020, the Test Case has reached final resolution with the delivery of a judgment by the Supreme Court on 15 January 2021. LMIE is reviewing how its UK Non-damage BI Policies are affected by the final resolution of the Test Case.
If you have submitted a COVID-19 related Non-damage BI claim, you will have been contacted to confirm whether or not your claim is affected by the Test Case.
Court Hearings and Judgments
Following an eight-day court hearing before Lord Justice Flaux and Mr Justice Butcher on 20-23 and 27-30 July 2020, judgment in the Test Case was handed down on Tuesday, 15 September 2020 (the "First Instance Judgment"). The First Instance Judgment is available at:
The Court accepted some of the FCA’s arguments about the effect of the Non-damage BI Policy wordings but the FCA appealed the decisions on some (but not all) of those issues on which it did not succeed. Six insurance companies appealed against the First Instance Judgment on other issues and also responded to the FCA’s appeal. Because of the importance and urgency of the issues raised, the appeals proceeded directly to the Supreme Court under the 'leapfrog' procedure, bypassing the Court of Appeal.
Following a four-day court hearing in the Supreme Court on 16-19 November 2020, the appeal judgment was handed down on Friday, 15 January 2021 (the "Supreme Court Judgment"). The Supreme Court Judgment is available at:
Information about the Test Case can be found:
- On the FCA website https://www.fca.org.uk/firms/business-interruption-insurance; and
- Information concerning BI insurance can be found on the Financial Ombudsman Service’s website https://www.financial-ombudsman.org.uk/coronavirus.
We have prepared answers to frequently asked questions which may help.
For UK Policyholders
My LMIE policy does not include Non-damage BI cover:
- This means that, under the terms and conditions of your policy, your insurance cover is only triggered following damage occurring either to your insured property or property nearby.
- You are not affected by the Test Case.
- If you have a claim, you should submit your claim as set out in your policy documents.
My LMIE policy includes Non-damage BI cover, but I do not have a COVID-19 related claim:
- If you do not have a COVID-19 related claim, you are not affected by the Test Case. Please continue to submit non-COVID-19 related claims as set out in your policy document.
- If you are unsure whether you have a COVID-19 related claim, please contact your broker or the agent through whom you purchased your policy.
My LMIE policy includes Non-damage BI cover and I have a COVID-19 related claim:
- The outcome of your COVID-19 related Non-damage BI claim may be affected by the final resolution of the Test Case. Please go to the Potentially Affected Claimants’ section below.
For Potentially Affected Claimants
I have a COVID-19 related Non-damage BI claim but have not yet submitted my claim:
- If you have not yet submitted your COVID-19 related Non-damage BI claim, please do so by following the claims procedure as set out in your policy.
I have submitted a COVID-19 related non-damage BI claim:
- Once your claim has been received, you will receive correspondence from us or our agents explaining the next steps in the process.
- COVID-19 related Non-damage BI claims have been accepted by LMIE where cover was provided under our policies. If your claim (or part of it) has been accepted, you will have received correspondence from us or our agents to that effect.
- By contrast, many COVID-19 related Non-damage BI claims have been declined by LMIE on the basis that cover was not provided under our policies. If your claim (or part of it) has been declined, you will have received correspondence from us or our agents to that effect.
- Following the Supreme Court Judgment, LMIE is reassessing all COVID-19 related Non-damage BI claims that (a) have been declined and (b) were identified by LMIE as being potentially affected by the final resolution of the Test Case (a "Potentially Affected Claim"). Your claim is a Potentially Affected Claim if your LMIE policy contains one or more coverage clauses that are the same or similar to the Non-damage BI clauses examined by the courts in the Test Case. Please note that clauses that:
- provide cover following discovery of a notifiable disease at the insured premises;
- define “notifiable disease” by reference to a specified list of diseases; or
- provide cover following damage to your property, or property nearby, that results in a government authority restricting or preventing access to your property
were not coverage clauses considered in the Test Case. If your claim falls for consideration under these types of coverage clauses, it is not a Potentially Affected Claim and your claim is not affected by the Test Case.
- In reassessing your Potentially Affected Claim, LMIE will apply the judgments in the Test Case (so far as relevant) and inform you promptly of the outcome of the reassessment.
- If, following the final resolution of the Test Case, you are not happy with the final decision on your claim, you are able to complain to us and we will review this in line with our complaints handling procedures. For complaints, please see below.
For Potentially Affected Complainants
My COVID-19 related Non-damage BI claim has been declined and I have logged a complaint:
- Your complaint (including in relation to any Potentially Affected Claim) is being reviewed under the LMIE complaints process and in accordance with the FCA’s Guidance. Once your complaint has been received, you will receive correspondence from us explaining the next steps in the process. A final decision on your complaint will be taken promptly.
- Following the Supreme Court Judgment, LMIE is reassessing any complaints which were not fully upheld and were identified by LMIE as being potentially affected by the final resolution of the Test Case (a "Potentially Affected Complaint"). In reassessing your Potentially Affected Complaint, LMIE will apply the judgments in the Test Case (so far as relevant) and inform you promptly of the outcome of the reassessment.
- If the reassessment is for a Potentially Affected Complaint where LMIE has already issued a final response, we will issue a revised final response and you will have a further six months to refer the complaint to the Financial Ombudsman Service.
My complaint has been escalated to the Financial Ombudsman Service:
- If your complaint about a relevant Non-damage BI Policy has been referred to the Financial Ombudsman Service, we have written to them with the results of LMIE’s review of the subject policy and its decision on your claim.
- You may contact the Financial Ombudsman Service https://www.financial-ombudsman.org.uk/businesses/resolving-complaint for further information on the status of your complaint.