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FCA ‘Test’ Case – Pass or Fail?

The Supreme Court heard in November 2020 an appeal against the Financial Conduct Authority for its latest test case. The case involved a ruling from the High Court in favour of up to 370,000 SME owners to be paid millions of pounds’ worth of the ‘business interruption’ insurance due to Covid-19.

The case was brought by the Financial Conduct Authority (‘FCA’) as a ‘test’ case to see if the courts would allow for such claims to be paid out or not. The reason it was brought as a ‘test’ case is the same reason that insurers are appealing it for: the ‘indivisible clause’ argument that was used by the FCA is said to be unfounded. The insurers claim that the policies the FCA are relying on were in fact designed to cover contagious diseases within a region, not a pandemic.

The insurers have a somewhat strong argument, and the problem lies in the interpreting on the contracts. The Supreme Court are set to announce their decision regarding the case in January 2021.

In the meantime, the FCA produced guidance for SMEs to enable businesses to draft claims and submit them as soon as the outcome of the case is communicated. What’s more, big insurers such as Axa have announced ahead of the verdict that they expect to be paying €1.5bn in Covid-19-related claims, with plans to cut €500 million costs by 2023 from redundancies.

It will be interesting to see the impact of the court’s decision in January, for which I invite you to stay tuned.

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