FCA test case update

19 June 2020
We are very aware that the COVID-19 pandemic is causing hardship across the UK economy and that many are experiencing difficulties in this unprecedented situation.   
Unfortunately, the vast majority of our insurance cover does not include pandemics. We do appreciate, however, that the Financial Conduct Authority (FCA) has received a number of questions and concerns from customers across the insurance industry where their business interruption policies do not cover COVID-19 losses. 
The FCA will be therefore be undertaking a ‘Test Case’ in order provide clarity and certainty to customers. Test Case is scheduled to be heard by the High Court from 20 July 2020 and we will be writing to individual customers over the next few weeks who have already submitted a claim or complained about the lack of cover. 

What the FCA will be doing

The FCA are now seeking court declarations in the Test Case aimed at resolving contractual uncertainty in selected Business Interruption insurance policies. The FCA have defined this ‘Test Case’ as 
“The proceedings brought by the FCA to resolve uncertainty as to whether certain non-damage business interruption insurance policies respond to claims related to the coronavirus pandemic.” 
And that during the Test Case:  
“acting in the public interest, the FCA will put forward policyholders’ arguments to their best advantage. We are aiming to obtain legal guidance in this way more quickly and at a lower cost to policyholders than would be the case if they took their own court actions.”

The types of claims the FCA will look at

The FCA has set out that: 
“Our view remains that most SME insurance policies are focused on property damage (and only have basic cover for BI as a consequence of property damage) so, at least in the majority of cases, insurers are not obliged to pay out in relation to the coronavirus pandemic.  This case is focused on the remainder of policies that could be argued to include cover.” 
And they have defined a ‘Potentially Affected Claim’ as 
“A claim made under a relevant non-damage business interruption policy for losses relating to the coronavirus pandemic where the outcome of the claim, including issues of causation, may be affected by the final resolution in the test case, whether or not the insurer has declined the claim by issuing a declinature letter or has made an adjustment or deduction for general causation.”
It is also important to note that the FCA have commented as follows:
“Policyholders should not assume that simple inclusion of their policy wording in this case will mean their policies are responsive. We are seeking a judgment that will help policyholders and insurers have a much clearer view of which business interruption policies respond to the pandemic, and those that don’t. Therefore, the court may well decide a number of these policies respond to the pandemic and others do not.”


As mentioned above, we are writing to individual customers who have already submitted a claim or complained about the lack of cover and we will also keep customers aware of significant developments via our website. We encourage customers to check this website regularly for updates.  

Other forms of help

The Government recognises that its own actions to save lives and beat the virus have resulted in sudden and acute difficulties for businesses large and small. It has announced several very substantial initiatives to help them overcome these, a number of which may apply to your business. We would encourage our policyholders to take full advantage of these where they can. These include loans on advantageous terms, cash grants, and employment protection measures. We recommend checking the Government website for more details and in Scotland
We are also supporting our customers with advice and guidance, aligned to the Government’s guidelines, to help mitigate the impacts of COVID-19, which is available on our website. For specific risk advice about topics including, health and safety, fire and security, you can contact our risk experts on 0345 600 7531