Result of the FCA Supreme Court Appeal on Business Interruption

What does this mean for our QBE policyholders?

As Coronavirus brought the United Kingdom to a standstill late March, many businesses reported a loss of earnings, with a very significant adverse effect experienced in the bar and nightclub industries. Many policyholders across the country, including clients of Romero and NDML, believed they should be able to claim. This is the story of the Covid-19 business interruption case: from initial claim to the Supreme Court, a story with peaks and troughs fuelled by uncertainty that resulted in a spectacular, felicitous verdict

The Story of the Business Interruption case

As has been widely publicised, many policyholders in the nightlife, leisure and hospitality industries were profoundly affected by the Covid-19 pandemic and suffered serious losses as a result of the same. This resulted in a large number of claims filed, each relating to the business interruption sections of their policies. 

At Romero and NDML, every policy was reviewed and two insurers stood out as having a potential obligation to settle any appropriate claim. These insurers were Hiscox, specifically with regards to their ‘public authority closures or restrictions’ clause, and QBE, regarding their ‘infectious diseases’ clause. We believed Hiscox policyholders had a justifiable claim because the lockdown prevented access to their premises and therefore they saw an interruption to their business operations. Similarly for QBE policyholders, we also believed this claim to be legitimate and could see just cause for a substantial payout. In the case of QBE, their disease clause related to an outbreak of infection occurring within 25 miles of a policyholder’s property which could be shown to have affected their regular business. 

However these insurers disputed policy liability, asserting that, in their view, the government lockdown was the direct cause of any business interruption. As both policies were ultimately rejected, it led to widespread concern about the lack of clarity and certainty across the insurance industry. Indeed, the only conclusion that could be reached was that these policies were not designed to deal with pandemics.

Given the above position, we referred the various policy issues to a QC for additional direction on the next possible steps. Unfortunately, “legal advice suggested we were on a sticky wicket” is how our technical claims manager, Mr. Dobbins, summarised their reply. Somewhat demoralised, we nonetheless remained in contact with a number of solicitors and the Financial Conduct Authority, and it was not long before the FCA confirmed their intention to test eight insurers in the High Court, with three to four sample wordings supplied for each. These various types of policy would potentially decide the outcome of 370,000 policyholders holding 700 types of policy issued by 60 different insurers – meaning, this was big. The High Court reviewed the FCA’s submissions over two weeks in September, and we were hopeful. 

Unfortunately, again the QBE claims were rejected and the legal advice we had previously received from the QC seemed to have been confirmed. Receiving word of this, all at Romero and NDML set to work and, alongside the NTIA (the Night Time Industries Association), we made representations to the FCA insisting that the QBE ruling be appealed. In a positive step, the FCA pushed through a Consequentials Meeting with the High Court and the appeal ‘leapfrogged’ to the Supreme Court.

The Verdict of the Business Interruption case

Throughout November and December, the Supreme Court heard the appeal, and their verdict was delivered on 15th January. The judgement is complex, fills 112 pages and deals with many issues – but cutting through the jargon our team are delighted to announce WE WON! The ‘disease’ clauses for both Hiscox and QBE were ruled to provide cover in the circumstances of coronavirus, and therefore policyholders of these insurers should have valid claims.

At Romero and NDML we are thrilled by the news and we have made contact with the clients directly affected by this verdict. Aside from the obvious benefit for policyholders receiving payments for their claims, we also believe that our support of the FCA’s action has saved upwards of tens of thousands of pounds for these businesses in legal fees and associated costs.

Whilst we have sought to make contact with all our clients who had relevant policies via Hiscox and QBE, if you have not received our communications on this point please call us on 0344 488 9205.