Test case litigation for business-related Covid-19 insurance claims that could pave the way to billions of pounds in business interruption payouts to impacted policyholders starts in the High Court today.

The case is being brought by the Financial Conduct Authority, the UK financial services regulator, and seeks clarity on the interpretation of business interruption (BI) insurance policies for both policyholders and insurers by judicially testing 17 representative wordings. 

The case, fast-tracked to be heard in the Financial List of the Commercial Court, pits the FCA against eight insurers in allowing or disallowing Covid-19-related BI claims, and thus deciding if cover would be provided. 

Christopher Woolard, interim chief executive at the FCA, said: “The court action we are taking is aimed at providing clarity and certainty for everyone involved in these BI disputes, policyholder and insurer alike. We feel it is also the quickest route to this clarity and by covering multiple policies and insurers; it will also be of most use across the market.”

The FCA said it was bringing the case under the Financial Markets Test Case Scheme to explore “key contractual uncertainties and causation issues to provide clarity for policyholders and insurers,” which it said was “in the public interest to advance [the FCA’s] consumer protection and market integrity objectives”.

The case is being heard by Lord Justice Flaux and Mr Justice Butcher, both highly experienced commercial judges, and insurance specialists when at the Bar. It is listed for eight days, and will be live-streamed here. 

The FCA are represented by Paul Lewis of City law firm Herbert Smith Freehills, with Devereux Chambers’ insurance silk Colin Edelman QC leading, and Leigh-Ann Mulcahy QC and Richard Coleman QC of Fountain Court in support. 

Against the FCA are eight insurers, selected as representative claimants at a previous case management hearing, including industry names such as Arch Insurance, Hiscox, Amlin, Royal & Sun Alliance, Zurich, and others. While the result will be binding on them, its impact will certainly be highly persuasive and possibly conclusive on up to 50 more, as well as on Lloyds of London. 

The eight law firms representing the test defendants include Davies Arnold Cooper Beachcroft, which represents two insurers, Amlin and Ecclesiastical; Hiscox is represented by Allen & Overy, led by Joanna Page; Simmons & Simmons represents Argenta; Clyde & Co represents Arch Insurance, QBE, and RSA, led by Neil Beresford, Richard Vaughan Price, and Mark Wing. RSA are being represented by DWF. 

Counsel in the case range from 7 King’s Bench Walk, which has significant representation across the defence, including superstar silks Gavin Kealey QC and Jonathan Gaisman QC, plus leading and junior counsel from Brick Court Chambers, 4 New Square, Essex Court, and others. The Association of British Insurers has taken a close interest, as has the Forum of Insurance Lawyers. 

An action group of affected policyholders, the Hiscox Action Group—represented by Mishcon de Reya, and led by Richard Leedham—were also allowed to intervene in the case.

Hiscox said it was "seeking expedited resolution of any contract dispute" of that related claim. In response, Leedham said the case aimed to "explain exactly why these policies should pay out and show the damage this refusal is doing to hundreds if not thousands of British businesses." 

The case continues.