The Financial Conduct Authority v Arch Insurance (UK) Ltd and others

The Financial Conduct Authority v Arch Insurance (UK) Ltd and others

Business interruption insurance policies cover losses caused by insured perils, including cases where insured perils operate concurrently with other causes arising from the same underlying event (COVID-19 pandemic). The 'but for' test does not exclude cover for losses caused by insured perils in combination with other non-excluded causes. Trends clauses should not reduce indemnity for losses caused by insured perils or their originating cause. The Orient-Express Hotels decision is overruled.

Parties
Appellant/respondent: Financial Conduct Authority; Respondent/appellant: Arch Insurance (UK) Ltd; Respondent/appellant: Hiscox Insurance Company Ltd; Respondent: Zurich Insurance Plc; Respondent/appellant: Argenta Syndicate Management Ltd; Intervener: Hiscox Action Group; Respondent/appellant: MS Amlin Underwriting Ltd; Respondent/appellant: Royal & Sun Alliance Insurance Plc; Respondent/appellant: QBE UK Ltd
Jurisdiction
England and Wales
Judgment Date
15 January 2021
Procedural Posture
Civil Appeal / Supreme Court Final Judgment
Outcome
Insurers' appeals dismissed; FCA and Hiscox Interveners' appeals allowed in part.
Legal Topics
Business Interruption Insurance, Causation, Policy Interpretation, Trends Clauses, COVID 19 Pandemic, Concurrent Causes
Insurance Law Contract Law Business Interruption Insurance Causation Policy Interpretation Trends Clauses COVID 19 Pandemic Concurrent Causes

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Parties

Financial Conduct Authority

Appellant/respondent

Arch Insurance (UK) Ltd

Respondent/appellant

Hiscox Insurance Company Ltd

Respondent/appellant

Zurich Insurance Plc

Respondent

Argenta Syndicate Management Ltd

Respondent/appellant

Hiscox Action Group

Intervener

MS Amlin Underwriting Ltd

Respondent/appellant

Royal & Sun Alliance Insurance Plc

Respondent/appellant

QBE UK Ltd

Respondent/appellant

Procedural Posture

Civil Appeal / Supreme Court Final Judgment

Legal Issues

  1. 1 Proper interpretation of disease, prevention of access, hybrid, and trends clauses in business interruption insurance policies
  2. 2 Causation requirements for insurance claims related to COVID-19
  3. 3 Effect of concurrent causes and the 'but for' test in insurance law

Ratio Decidendi

Business interruption insurance policies cover losses caused by insured perils, including cases where insured perils operate concurrently with other causes arising from the same underlying event (COVID-19 pandemic). The 'but for' test does not exclude cover for losses caused by insured perils in combination with other non-excluded causes. Trends clauses should not reduce indemnity for losses caused by insured perils or their originating cause. The Orient-Express Hotels decision is overruled.

Court Disposition

Insurers' appeals dismissed; FCA and Hiscox Interveners' appeals allowed in part.

Orders

  • Appropriate declarations and orders to be agreed by parties in light of judgment.
  • Orient-Express Hotels decision overruled.