Libertatem Magazine

Supreme Court of the United Kingdom To Deliver Final Judgment in COVID-19 Insurance Test Case

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The Supreme Court of the United Kingdom began its’ four-day hearing in the matter of Financial Conduct Authority v Arch Insurance [2020]. The appeal concerned the construction of certain provisions in insurance policies written by the Appellant Insurers relating to the insurance policy payouts amidst the COVID-19 pandemic.


In June 2020, the Financial Conduct Authority (FCA), the regulator of the respondent insurers, brought a test case to determine issues of principle concerning policy coverage under various specimen wordings underwritten by the defendants in respect of claims by policyholders to be indemnified for business interruption losses arising in the context of the COVID-19 pandemic and the advice of and restrictions imposed by the UK Government in consequence. 

England & Wales High Court Decision

Sitting in the High Court of the Queen’s Bench Division, Butcher J and Flaux LJ, concurrently held that out of the 21 insurance policy types at dispute, most (13), but not all (08), should pay out offerings to the policyholders of small and medium-sized enterprises (SMEs). The Court held that eleven of these disputed insurance policies should lead to payouts. Notably, the Court also discharged claims brought against Zurich Insurance Plc and Ecclesiastical Insurance Office Plc.

What Would the Supreme Court Be Looking At?

There are two matters for consideration by the Supreme Court: 

First, matters of construction relating to (i) “Disease Clauses” i.e. those which can be triggered by the occurrence of severe acute respiratory syndrome coronavirus 2 (“Covid 19”), typically within a specified distance of the insured’s premises; (ii), “Prevention of Access Clauses” i.e. those triggered by public authority intervention preventing access to, or use of, premises as a result of Covid-19. Lastly, “Hybrid Clauses” i.e. those clauses which contain wording from both Disease and Prevention of Access Clauses.

The second issue before the Court is in relation to the correctness of the High Court in the application of certain counterfactual scenarios to the operation of the clauses in relevant policies which provided for loss adjustments (the “Trends Clauses”); and its analysis of Orien-Express Hotels Ltd v Assicurazioni Generali S.p. A.


The issue has implications to more than 370,000 SME(s) and a total potential payout of £1.2 bn. The final judgment of the Supreme Court shall also provide authoritative guidance for other similar policy payout claims across the UK; for instance, the Financial Ombudsman Service and courts in Scotland and Northern Ireland are expected to use the judgment to rule on other similar cases.

The case ID of the Supreme Court case is Financial Conduct Authority (Appellant) v Arch Insurance (UK) Ltd and Others (Respondent) UKSC 2020/0177″.

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