The Financial Conduct Authority (FCA) v Arch Insurance (UK) Ltd & Ors

The Financial Conduct Authority (FCA) v Arch Insurance (UK) Ltd & Ors

Business interruption insurance policies with disease, hybrid, or prevention of access clauses generally provide cover for losses caused by COVID-19 and government measures, provided the policy wording does not expressly or impliedly exclude such cover. Where the insured peril is composite (e.g., disease plus government action), the counterfactual for loss assessment must strip out all elements of the peril, including the pandemic and government response. Causation is satisfied if the local occurrence of disease formed part of the national outbreak that led to the government action. Trends clauses do not permit insurers to reduce indemnity by reference to the effects of the insured peril...

Parties
Claimant: The Financial Conduct Authority; Defendant: Arch Insurance (UK) Limited; Defendant: Argenta Syndicate Management Limited; Defendant: Ecclesiastical Insurance Office PLC; Defendant: Hiscox Insurance Company Limited; Defendant: MS Amlin Underwriting Limited; Defendant: QBE Limited; Defendant: Royal & Sun Alliance Insurance PLC; Defendant: Zurich Insurance PLC; Intervener: Hospitality Insurance Group Action; Intervener: Hiscox Action Group
Jurisdiction
England and Wales
Judgment Date
15 September 2020
Procedural Posture
Test Case (financial Market Test Case Scheme) / First Instance Judgment
Outcome
Declarations granted in favour of the FCA on the construction of most disease, hybrid, and prevention of access clauses; some policy wordings found not to provide cover; insurers' arguments on causation and trends clauses rejected for most wordings; guidance given on proof of prevalence.
Legal Topics
Business Interruption Insurance, Policy Interpretation, Causation, COVID 19 Pandemic, Trends Clauses, Exclusion Clauses, Burden of Proof, Prevalence of Disease
Insurance Law Contract Law Civil Procedure Business Interruption Insurance Policy Interpretation Causation COVID 19 Pandemic Trends Clauses +3 more

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 7 Authorities cited 18 Party arguments 2 Amounts and remedies 6
Sign in to unlock

Parties

The Financial Conduct Authority

Claimant

Arch Insurance (UK) Limited

Defendant

Argenta Syndicate Management Limited

Defendant

Ecclesiastical Insurance Office PLC

Defendant

Hiscox Insurance Company Limited

Defendant

MS Amlin Underwriting Limited

Defendant

QBE Limited

Defendant

Royal & Sun Alliance Insurance PLC

Defendant

Zurich Insurance PLC

Defendant

Hospitality Insurance Group Action

Intervener

Hiscox Action Group

Intervener

Procedural Posture

Test Case (financial Market Test Case Scheme) / First Instance Judgment

Legal Issues

  1. 1 Whether business interruption insurance policies cover losses arising from COVID-19 and related government measures
  2. 2 How policy wordings regarding disease, hybrid, and prevention of access clauses should be construed
  3. 3 What is the correct approach to causation and the application of trends clauses

Ratio Decidendi

Business interruption insurance policies with disease, hybrid, or prevention of access clauses generally provide cover for losses caused by COVID-19 and government measures, provided the policy wording does not expressly or impliedly exclude such cover. Where the insured peril is composite (e.g., disease plus government action), the counterfactual for loss assessment must strip out all elements of the peril, including the pandemic and government response. Causation is satisfied if the local occurrence of disease formed part of the national outbreak that led to the government action. Trends clauses do not permit insurers to reduce indemnity by reference to the effects of the insured peril...

Court Disposition

Declarations granted in favour of the FCA on the construction of most disease, hybrid, and prevention of access clauses; some policy wordings found not to provide cover; insurers' arguments on causation and trends clauses rejected for most wordings; guidance given on proof of prevalence.

Orders

  • Declarations as to the proper construction of the representative policy wordings
  • Guidance on causation and application of trends clauses