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Supreme Court hands down decision on Business Interruption test case


On Friday, 15th January 2021, the Supreme Court gave judgment in the test case brought by the Financial Conduct Authority (the FCA) regarding the interpretation of various business interruption insurance policies.


The decision is roundly being declared a victory for policyholders with the Supreme Court dismissing the appeals made by the insurers and largely upholding the appeals brought by the FCA and a policyholder action group.


The test case concerned certain business interruption insurance policies and their interpretation in connection with losses associated with COVID-19. The action was taken by the FCA to obtain clarification in light of the urgency associated with indemnifying policyholders with valid claims, given the current climate, and also to protect the reputation of the insurance industry.


Our previous blog post can be found here and provides an overview of the key issues and the decision reached by the High Court.


In summary, the Supreme Court held that:


  • Business interruption cover which was triggered by “prevention of access” or a hybrid of “prevention of access” and “disease” events would have cover for business interruption losses irrespective of whether the losses were also caused by some other event happening at the same time.

  • Business interruption cover which contained a “disease” clause would provide cover for business interruption losses where there had been an occurrence of COVID-19 within the vicinity or specified radius of the business in question. The requirement to show that there had been an occurrence would be satisfied where it was demonstrated that there had been one or more cases of COVID-19 within the area required by the policy, which had occurred before the event of disruption caused by the implementation of national restrictions.

  • Insurers could not rely on trends clauses in order to reduce the value of a loss caused by other associated COVID-19 effects which were uninsured.


The FCA’s Executive Director of Consumers and Competition, Sheldon Mills, has said:

We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible. Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.


The decision of the Supreme Court will bring certainty and clarity to policyholders and, whilst the test case was not designed to address all possible policies and outcomes, it has dealt with key contractual uncertainties.