As restrictions start to ease, the possibility of some kind of summer break is again on the horizon. However, as we enter July 2020, some parts of the UK continue to await the opening of restaurants, beer gardens and much-needed hairdressers.

Take our Sixty Second Survey to tell us about your experience. How businesses have responded to the various regimes could impact upon the viability of business interruption claims across the UK, notwithstanding the current Financial Conduct Authority (FCA) test case.

What will the FCA test case consider?

The FCA raised proceedings in the High Court in England in June 2020 with a view to resolving contractual uncertainty around the validity of many business interruption claims. It may be too simplistic however to assume that the facts put before the High Court can be readily adapted to businesses operating outside of England. There are also a wide range of different policy wordings, with each case likely to turn on its own circumstances.

The FCA contends that certain business interruption policies should respond to the events of COVID-19 in light of advice given by the UK Government from 16 March 2020. Although the FCA recognises in its Particulars of Claim that COVID-19 became a notifiable disease in Scotland and Northern Ireland earlier than it did in England or Wales and that different rules have applied in each of the four UK nations, it does not examine those differences in any detail.

As we said in our blog on Business Interruption in Scotland, businesses had additional rules and guidance to consider before being able to maintain any Scottish premises or operations. Perhaps confusingly, rules made by devolved governments apply even if businesses have an insurance contract said to be governed by the law of England & Wales; and not all guidance is compulsory or has the force of law.

Whilst the FCA perceives that there were only ‘minor differences’ between the various regimes, even a minor divergence in rules or guidance may make all the difference to policy interpretation.

What impact will the ruling have across the UK?

The FCA intends that the test case will provide clarity for policyholders and insurers on key contractual uncertainties and causation issues.

Insurers are challenged on several grounds for declining cover, including where there was no order requiring businesses to close completely, or where guidance was followed but did not amount to a ‘public authority restriction’. It is easy to imagine however that a devolved government may have effectively ordered complete closure where the UK Government rules would not have had the same effect had they applied. It is unclear whether the High Court can or will deal with those issues, which may leave the question of coverage open to doubt in some parts of the UK.

The decision may not be available for some months with a second trial date in September 2020 looking likely and given the possibility of an appeal cannot be ruled out where the issues at stake are of such importance to so many.

Take action

Those affected by business interruption cover and operating in Scotland, Northern Ireland or Wales should consider:

  • whether the applicable regime could have an impact on the viability of any business interruption claims;
  • the relevance of the test case to their circumstances; and
  • whether to seek other remedies pending the decision.

Take our online survey to share your thoughts or find out more.


Laura McMillan

Partner & Director of Advocacy