Arguments

The Supreme Court heard four days of arguments, from 16 to 19 November 2020,^[6][20] considering 13 of the 21 types of policy wording considered by the High Court.^[17] The parties sought to clarify the interpretation of clauses which cover for business losses in cases of: a "notifiable disease" at or near the business premises; prevention of access to business premises due to public authority intervention; an estimation of business performance had the disruptive event not occurred.^[21]

On the disease clauses, the court held that while there was a variation across policies in the wording of these clauses, none of these differences materially altered their interpretation.^[22] Insurers argued that business interruption cover only covered local outbreaks of COVID-19. The High Court held that whether the outbreaks were local was relevant because business disruption had been caused locally, as a result of the broader pandemic.^[16] The Supreme Court found that the clause covers only occurrences of the effects of the disease, inside the specified geographical area.^[23]

Insurers argued that their business interruption policies did not cover unprecedented events or restrictions, such as the March lockdown in the United Kingdom,^[6][24] adding that payouts should be denied in line with strict interpretations of the policy wording.^[3] A lawyer for MS Amlin told the court only business loss claims as a result of COVID infections within a local, 25-mile radius of the insured property were covered, specifically excluding claims as a result of a nationwide lockdown.^[11]

Decision

The Supreme Court unanimously found in favour of the claimants on 15 January 2021.^[3][6] Nicholas Hamblen, handing down the decision, said "the FCA's appeal is substantially allowed and the insurers' appeals are dismissed."^[3] Michael Briggs, another Supreme Court Justice, said that the insurers' claims seemed, to him, to be "clearly contrary to the spirit and intent of the relevant provisions of the policies in issue", adding "it is clear from the use of the definition of a 'notifiable disease' in most of the relevant clauses[] that Covid-19 [when it appeared] fell squarely within the types of disease for which all the relevant disease and hybrid clauses provided cover."^[17][24]

Although only eight insurers were named parties in the case – including Hiscox, MS Amlin, QBE, Arch, Zurich, and Royal & Sun Alliance – the ruling provides guidance for as many as 700 policies from 60 insurers selling similar products, affecting up to 370,000 businesses.^[3][6] Labelled a "complex ruling", the decision is expected to guide decisions by the Financial Conduct Authority, the Financial Ombudsman, and the insurance sector, on similar insurance claims involving disease clauses, business access to properties, and lost earnings.^[6][25]

Subsequent legal authorities

The position now may be that authority of the test case to be used to decline certain policies is significantly undermined with the Supreme Court, the Arbitration and most recent High Court authority departing from the reasoning in the case at first instance.

This has resulted further litigation.

These have generally been favourable to policyholders and resolved against insurance companies.

Live litigation

Multiple cases are emerging out of the legal landscape associated with this case; they are being handled as linked cases by the Commercial Court.^[35][28][36]

• A case involving issues as to 'at the premises' cover is Mayfair Banqueting t/a Maddox Club v AXA, CL-2021-000737, and a trial has been fixed for December 2023.^[36]
• A business interruption cover under a Motor Trade Policy Simpsons (Preston) Ltd v MS Amlin, CC-2021-MAN-000079; has been commenced in the Manchester CCC. It will be managed there, but in conjunction with this COVID-19 Business Interruption sub-list. A trial has been fixed for September 2023.^[36]
• In the further case of Lumi Power Yoga Ltd v Covea,^[37] CL-2021-0007 has a trial listed for December 2023.^[38]

The Court is also managing, as part of the COVID-19 sub-list a further insurance (though not BII) case, namely World Challenge Expeditions v Zurich, CL-2021-000322.^[36]

NFU Mutual/Penningtons Group Action

The NFU Mutual sold a significant number of "potentially affected" businesses interruption policies. Its 2021 Report and Accounts did acknowledge that the business had additional potential exposure though in 2022 when it stated the "Coronavirus pandemic[represents]... a risk that,.. increases our exposure and liability e.g. Court / Regulatory rulings on coverage"^[39]

In January 2022, it was announced that a group action, headed by Penningtons Manches Cooper LLP, was underway to address this contended breach of contract.^[40] Each member of the group action would be, on success, entitled to up to £50,000 per policy, and there are thought to be thousands of policies sold, suggesting the scale of this action could be very significant.^[41]

Commenting on this situation an impacted policyholder has said: "[i]n good faith, we paid our premiums to NFU Mutual for years to protect us ... we reached for the comfort and the security of the longstanding relationship with NFU Mutual and it turned to total ash."^[42] Meanwhile, in a Chartered Institute of Insurance podcast at the beginning of the pandemic in May 2020, a director of the NFU Mutual, Nick Turner (at the time sales and agency director, and subsequently CEO) stated that:

Trust is important everywhere in insurance ... If you haven't written a policy wording very precisely to protect the insurance company and bring clarity to the consumer, then that is where the problems lie.. We [will] have to work to renew trust with certain customers [who may have been let down], it will be challenging this is going to run and run  ... if [the issues around policies we have sold have put policyholders] into incredibly difficult positions or even administration, nothing is going to put a smile on [their] face^[43]