Business interruption insurance: pandemic claims

The insurance cover for business interruption losses is typically triggered by material damage that gives rise to the financial loss. Although it has been suggested in some US courts that the Covid-19 virus might cause material damage to property, the definition of damage – physical alteration to the integrity of property – removes any serious possibility of the argument’s success. Accordingly, if there is to be business interruption cover following a pandemic there has to be some trigger of cover independent of physical damage.

The Financial Conduct Authority v Arch Insurance (UK) Ltd and Others [2020] EWHC 2448 (Comm) is the long-awaited test case on the meaning of such extensions to cover. The High Court, consisting of Flaux LJ and Butcher J, was asked to review a number of policy wordings and to give preliminary rulings on their meaning. No actual claims were dealt with in the judgment. The FCA estimated that the test case covered some 700 policies issued by over 60 different insurers and affecting up to 370,000 policyholders.