19 Jan 2021

'Much-needed clarity' - lawyers reflect on the landmark UK Covid-19 insurance test case

While the claimant lawyers are celebrating, advisers on both sides have welcomed the Supreme Court's judgment

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An array of UK claimant and defendant lawyers have been assessing the impact of the Supreme Court Covid-19 business interruption insurance test case, which came to a headline-grabbing conclusion last Friday.

Lawyers acting for the for the Financial Conduct Authority (FCA), which led the initiative, and for the 1,000s of small businesses affected by the first lockdown who can now expect pay outs were unsurprisingly celebrating for their clients. But there was agreement on both sides that the landmark ruling had delivered welcome clarity in an impressively short timeframe.

The judgment delivered a particularly notable victory for Herbert Smith Freehills (HSF), given that the FCA's position was substantially backed by the court.

HSF partner Paul Lewis, the FCA’s lead adviser, said the ruling had improved the position of policyholders “significantly beyond that which was already established by the High Court judgment”.

Mishcon de Reya partner Richard Leedham added that most of the members of the Hiscox Action Group,  which he advised, were covered as well as “RSA and now all QBE policyholders whom we represented at first instance through [fellow partner] Sonia Campbell and Hospitality Insurance Group Action”.

For Luke Harrison, of London litigation boutique Keidan Harrison, the judgment delivered a favourable ruling on the meaning of trends clauses and overruled the decision in Orient-Express meaning the quantum of claims would be much greater. That, he argued, meant “businesses in the leisure, hospitality, travel and tourism sectors stand to gain the most from the decision”.

Stephenson Harwood partner Genevieve Quierin welcomed the “good news for so many of my clients”, adding: “Hopefully it will mean many businesses can continue to operate despite the current lockdown.”

The FCA said it would work with insurers to ensure they moved quickly to pay valid claims in the light of the ruling, making interim payments wherever possible. It added that lawyers for the eight insurers, the regulator, and the interveners, would distil the ruling into a set of declarations to be issued by the court. 

Huw Evans, the Association of British Insurers’ CEO, confirmed: “Customers who have made claims that are affected by the test case will be contacted by their insurer to discuss what the judgment means for their claim.” He said claims would be settled as soon as possible and in many cases the process of settling claims had begun.

James Pollock, head of international insurance and construction at Simmons & Simmons, who advised Argenta Syndicate Management, said the Supreme Court had adopted a “novel” approach both to ‘but for’ and ‘proximate cause’ causation, which would have “important ramifications not only for business interruption insurance, but also for the insurance market more generally”.

Lawson Caisley, a partner in Allen & Overy’s litigation and investigations group, welcomed “much needed clarity in a complex legal area” that set “a ground breaking precedent for the insurance industry”.

Caisley, whose firm represented Hiscox Insurance, added: “It also demonstrates that the English courts are able to respond swiftly to matters of vital public importance through the new test case scheme, and, as the FCA pointed out, the speed with which this was done reflects well on all those who voluntarily took part.”

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