Coronavirus (COVID-19)—FCA non-damage business interruption insurance test case
Produced in partnership with James Beeton of 12 King's Bench Walk and Cressida Mawdesley-Thomas of 12 King's Bench Walk

The following Insurance & Reinsurance practice note produced in partnership with James Beeton of 12 King's Bench Walk and Cressida Mawdesley-Thomas of 12 King's Bench Walk provides comprehensive and up to date legal information covering:

  • Coronavirus (COVID-19)—FCA non-damage business interruption insurance test case
  • Disease clauses
  • ‘Notifiable disease’
  • ‘Occurrence’ of illness ‘sustained by’ a person
  • ‘Following’ an occurrence of the disease
  • ‘Occurrence’ of the disease ‘within a radius of 25 miles of the Premises’
  • General exclusion clause: loss due to ‘epidemic and disease’
  • Vicinity clauses
  • Sanitary arrangements clauses
  • Prevention of access and hybrid clauses
  • More...

Coronavirus (COVID-19)—FCA non-damage business interruption insurance test case

Unlike conventional perils such as fire or flood, an outbreak of a virus cannot so easily be located at a particular place and time. The 2020 coronavirus (COVID-19) outbreak and consequent government action therefore presented insurers with a novel loss scenario, in relation to which the factual complexities arising were compounded by a lack of clear judicial authority on some of the key issues that the scenario posed in the context of business interruption claims, including:

  1. the proper construction of composite insured perils in non-damage business interruption polices (ie, the so-called ‘disease’, ‘prevention of access’ and ‘hybrid’ clauses)

  2. the correct approach to causation in the context of so-called ‘wide-area’ perils, which are apt to result in damage not only to the insured property but also to the surrounding area

  3. identification of the proximate cause of a loss where there is a multitude of competing causes, some of which are insured and some of which are not

  4. the proper construction and practical application of ‘trends’ clauses in the context of a wide-area peril

In light of the urgent need to indemnify policyholders with valid claims and the need to protect the reputation of the insurance industry, the Financial Conduct Authority (FCA), in consultation with policyholders and insurers, commenced a test case under the Financial markets test case scheme. The

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