Update on FCA’s COVID-19 business interruption insurance test case

1. Headline summary

A “consequentials hearing” in the FCA’s COVID-19 test case (The Financial Conduct Authority v Arch and others [2020] EWHC 2448 (Comm)) took place on Friday 2 October 2020. The purpose of the hearing was to:

• determine the declarations to give effect to the findings of the Court as set out in its judgment dated 15 September;
• determine the applications made by certain parties (and the Hiscox Action Group as intervener) for certificates under section 12(1) of the Administration of Justice Act 1969 for permission to make “leapfrog” appeals to the Supreme Court;
• determine the applications made by certain parties for permission to appeal to the Court of Appeal; and
• to deal with a request to intervene from a non-party insurer – QIC Europe Limited - seeking to be joined to the Test Case.

The majority of the declarations (which are intended to give effect to the judgment) had been agreed between the parties prior to the hearing. The parties had not managed to agree the wording of a small number of declarations, and there was legal argument on these at the hearing.

In terms of the appeal applications, the Court granted “leapfrog” certificates to all parties that sought one, namely the FCA, Arch, Argenta, MS Amlin, Hiscox, QBE, RSA and the Hiscox Action Group.

The Court also granted permission to the same parties to appeal to the Court of Appeal. Such permission was given in the event that permission to appeal is not granted by the Supreme Court.

The Court rejected the application by QIC Europe Limited to be joined to the Test Case.

2. Declarations

The High Court’s declarations constitute the final orders giving effect to Court’s judgment in the Test Case. They will thus be essential to ensure that the judgment is clearly understood and can be readily applied to determine coverage on individual claims.

The declarations addressed all the principal issues considered by the court, including the following areas:

• How the Disease, Prevention of Access/Public Authority and Hybrid wordings under each of the tested policies are to be applied;
• How policyholders may in principle prove the presence of COVID-19 as required under the various policies; and
• The proper casual requirements and how such requirements and the trends clauses are to be applied.

The sealed Order setting out the declarations will be published on the FCA website here as soon as they are received from the Court.

3. Applications to appeal

The FCA, six of the eight Defendants (Arch, Argenta, MS Amlin, Hiscox, QBE, RSA) and one of the two Interveners (Hiscox Action Group) applied to the High Court for a ‘leapfrog’ certificate entitling them to seek permission to appeal directly from the Supreme Court on various of the findings by the court. The High Court granted a ‘leapfrog’ certificate to appeal to all these parties. The applications can all be found on the FCA website here.

4. Next steps

The parties that were granted certificates may now seek permission to appeal from the Supreme Court. The FCA has indicated that it is continuing to hold discussions with all relevant insurers and action groups in an effort to find a solution that avoids the need for any appeals and enables pay-outs on eligible claims to occur as quickly as possible.

However, if a resolution cannot be reached over coming weeks and the Supreme Court grants permission to appeal, the parties that have received certificates will likely proceed with an appeal to the Supreme Court. As an intervener in the High Court at first instance, the Hospitality Insurance Group Action may also apply to intervene again in the Supreme Court.

The parties have agreed that they will seek to have any appeal heard on an expedited basis.