Coronavirus (COVID-19)—Hiscox, QBE and Aviva policyholders permitted to intervene in FCA business interruption test case

Coronavirus (COVID-19)—Hiscox, QBE and Aviva policyholders permitted to intervene in FCA business interruption test case

Law360, London: Groups of QBE, Aviva and Hiscox policyholders may intervene in the Financial Conduct Authority’s (FCA) test case in respect of coronavirus (COVID-19) business interruption insurance liability, the High Court ordered on 26 June 2020.

The case is The Financial Conduct Authority v Arch Insurance and otherscase number FL-2020-000018, in the High Court of Justice of England and Wales.

Lord Justice Flaux and Mr Justice Butcher allowed the policyholders to intervene in the FCA’s test case against eight insurers in respect of liability for ‘non-damage’ coronavirus business interruption insurance claims.

Butcher J said the policyholders have an interest in the outcome of the case and it is important that their arguments are ‘fully and properly’ put forward alongside the FCA’s submissions at the trial, which is due to begin on 20 July 2020 and expected to last eight days.

The test case will mark the first use of the Financial Markets Test Case Scheme. It is expected to bring legal clarity as to the extent to which insurers are responsible for paying compensation for hundreds of businesses forced to close because of the coronavirus pandemic and the government’s response to it. The test case focuses on 17 disputed policy wordings.

‘We have no doubt that the vast majority of points will be put before us by the FCA. [But] there may be some issues, because perhaps there may be a conflict between various policyholders of the precise points, or differences of nuance’, Butcher J said at the virtual hearing….‘It is desirable that those two groups make submissions.’

The judge said the intervention will be subject to ‘strict case management directions’. He said the FCA will have to liaise with the new participants and warned against duplication of arguments or any widening of the representative terms of the policies that are due to be scrutinised at trial.

An individual policyholder of RSA also applied to be added to the case but the two judges ruled that out, concluding that his policy falls beyond the ‘carefully chosen’ parameters of the test case as it requires damage to property.

The eight insurers have filed separate defences denying they are liable to pay out on the claims.

MS Amlin and Ecclesiastical responded in a joint defence to the FCA’s proposal that it should be possible to ascertain liability by determining whether there was a single case of coronavirus within a radius that is included in many of the policy wordings.

Hiscox has said that businesses would have suffered financial losses even without a nationwide lockdown because people would have avoided going out for fear of catching the disease.

Philip Edey QC, counsel for the QBE and Aviva policyholders, told the court that his clients have the ‘very strongest interest’ in the test case as it is ‘essentially their rights that are being determined’.

The Hiscox policyholders have commenced their claims pursuant to arbitration clauses in their policies, but their lawyers say that Hiscox has so far refused to agree to an expedited arbitration.

The Hiscox Action Group of 400 business owners all have policies from Hiscox that offer cover if a company is forced by a public authority to close following an infectious disease outbreak. Hiscox said its policies were not intended to cover losses from a pandemic.

The case will look specifically at non-damage extensions to business interruption policies, which offer cover if a premises was forced to close because of, for example, an infectious disease outbreak. Other extensions being tested in court may be triggered when a ‘public authority’, ‘local authority’, ‘competent authority’ or government denies access to a premises, or advises closure.

Many of the insurers share policy wordings that restrict cover when a disease outbreak occurs outside a set geographical radius, which ranges between 1–25 miles.

The claim is the first to be granted ‘test case’ status in the Financial List, which deals in complex, high-value financial services cases. The scheme allows parties to apply for an advisory opinion on a legal, industry-wide problem without bringing individual contentious claims.

The trial will take place before Flaux LJ from the Court of Appeal and Butcher J, who sits in the Commercial Court.

Arch Insurance UK is represented by John Lockey QC and Jeremy Brier of Essex Court Chambers, instructed by Clyde and Co LLP.

Zurich Insurance Plc is represented by Andrew Rigney QC and Caroline McColgan of Crown Office Chambers and Craig Orr QC and Michelle Menashy of One Essex Court, instructed by Clyde and Co LLP.

QBE UK Ltd is represented by Mark Howard QC of Brick Court Chambers and Rachel Ansell QC of 4 Pump Court, instructed by Clyde and Co LLP.

Argenta Syndicate Management Ltd is represented by Simon Salzedo QC and Michael Bolding of Brick Court Chambers, instructed by Simmons & Simmons LLP.

Ecclesiastical Insurance Office Plc and MS Amlin Underwriting Ltd are represented by Gavin Kealey QC and Andrew Wales QC of 7 King’s Bench Walk, instructed by DAC Beachcroft LLP.

Hiscox is represented by Jonathan Gaisman QC of 7 King’s Bench Walk, instructed by Allen & Overy LLP.

RSA is represented by David Turner of 4 New Square, instructed by DWF Law LLP.

The FCA is represented by Colin Edelman QC of Devereux Chambers and Leigh-Ann Mulcahy QC and Richard Coleman QC of Fountain Court Chambers, instructed by Herbert Smith Freehills LLP.

The QBE and Aviva policyholders are represented by Philip Edey QC of Twenty Essex.

The Hiscox policyholders are represented by Ben Lynch QC of Fountain Court Chambers, instructed by Mishcon de Reya LLP.

This content is based on an article first published by Law360, a LexisNexis® company, on 26 June 2020 and is published with permission.

Further information can be found at: https://www.law360.com/insurance-uk (subscription required).

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