Judgment handed down in FCA’s COVID-19 business interruption insurance test case

The High Court has today handed down judgment in the COVID-19 Business Interruption insurance test case of The Financial Conduct Authority v Arch and Others. Herbert Smith Freehills represented the FCA (who was advancing the claim for policyholders) in the case, which considered 21 lead sample wordings from eight insurers. Following expedited proceedings, the judgment brings highly-anticipated guidance on the proper operation of cover under certain non-damage business interruption insurance extensions.

While different conclusions were reached in respect of each wording, the court found in favour of the FCA on the majority of the key issues, in particular in respect of coverage triggers under most disease and ‘hybrid’ clauses, certain denial of access/public authority clauses, as well as causation and ‘trends’ clauses. The judgment should therefore bring welcome news for a significant number of the thousands of policyholders impacted by COVID-related business interruption losses.

For more information see this post on our Insurance Notes blog.

Our new publication: COVID-19 Contract Disputes Guide

The economic disruption caused by the COVID-19 pandemic inevitably exposes businesses to heightened legal risk. In particular, counterparties may seek to delay, avoid performance and/or terminate agreements. This may be either because COVID-19 has legitimately prevented them from performing their contractual obligations, or because they are seeking to use the pandemic as an excuse to extricate themselves from a bad deal.

We have published a guide which provides a general overview of the common bases for avoiding contractual obligations in commercial contracts, including a comparison of the key rights and remedies. Click here to access the guide.

The banking litigation team has also prepared a more detailed COVID-19 disputes “handbook” for in house legal teams at banks, specifically considering the key clauses engaged in standard financial market documentation and sharing our market insight as to the types of litigation risks our clients are already seeing in each asset class. If you would like to receive a copy of the handbook, please get in touch with your usual HSF contact.