Supreme Court rules in favour of businesses in landmark Business Interruption Insurance test case

Further to the High Court decision in September 2020 in the case of The Financial Conduct Authority v Arch Insurance (UK) Ltd and Ors, the Supreme Court has today handed down its judgment on the operation of Business Interruption insurance policies, with particular reference to the effects of Covid-19. Whilst this is an English and Welsh decision, it will represent welcomed guidance for businesses in Scotland and the rest of the UK.

The Supreme Court has substantially found in favour of the insured businesses.

One important point of interest was that the Supreme Court disagreed with the High Court’s position, in relation to “prevention of access”, that only when compelled to close by law would the policy terms be met.

Instead, the Supreme Court took the more pragmatic and commercial interpretation that the terms of the insurance policy may apply where an instruction by a public authority has been given in mandatory and sufficiently clear terms, indicating that compliance with that instruction is required (or be reasonably understood to be required) without the need for recourse to legal powers.

Given the continual and fast-moving changes to the Government’s instructions through press conferences in response to Covid-19, this is welcomed clarification for businesses and policyholders alike.

A more detailed analysis on the effect that this decision has for Scottish businesses will follow.

Full judgement is here

Press summary is here

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If you require advice related to business interruption policy wording or the impact of this decision, please get in touch with a member of our specialist Dispute Resolution team.