High Court judgment in FCA business interruption test case: Supreme Court appeal confirmed

This article is a follow-up to our previous discussion on the case.

On 15 September, the High Court handed down its judgment in the unprecedented FCA v Arch and others business interruption insurance (“BII”) test case. The High Court found in favour of the Financial Conduct Authority (“FCA”) on the majority of the issues, and the case was overall a resounding victory for policy holders. Accordingly, this meant that businesses forced to close due to COVID-19 restrictions could, subject to an appeal and the terms of their policies, be entitled to be indemnified for their losses by insurers involved in the test case.

However, as predicted, the majority of the test case’s participants have sought to appeal the High Court’s decision. This does not include Ecclesiastical and Zurich who have stated that the High Court’s decision was in their favour. On 2 October, during a virtual hearing, the High Court approved the appeal process to ‘leapfrog’ straight to Supreme Court – the highest court in the UK.

What is a leapfrog appeal?

A ‘leapfrog’ appeal is a special and relatively rare form of appeal in which a case heard by the High Court is appealed directly to the Supreme Court, therefore bypassing the Court of Appeal.

The test for leapfrogging is set out in the Administration of Justice Act 1969 and just one of the following three following possibilities must be satisfied:

  1. the proceedings entail a decision relating to a matter of national importance or consideration of such matter;
  2. the result of the proceedings is so significant (whether considered on its own or together with other proceedings or likely proceedings) that, in the opinion of the judge, a hearing by the Supreme Court is justified; or
  3. the judge is satisfied that the benefits of earlier consideration by the Supreme Court outweigh the benefits of consideration by the Court of Appeal.

It was observed that all three of these prerequisite conditions were satisfied by the test case given the size, scope and potential impact of this case.

Date set for the appeal

On 2 November, the Supreme Court granted permission to appeal to all those who applied and have set a date of 16 November for the expedited appeal. The hearing is expected to last four days and will be heard by five Supreme Court Justices. The case will be heard via video link and will be available to watch live through the Supreme Court’s website.

The legal challenge will focus on the wording of disease clauses and prevention of access clauses (i.e. where an insured is unable to access their premises) contained in the BII policies. The Justices will also look at "hybrid" wording that includes elements of both clauses and consider whether the High Court was right in its analysis of the precedent set down in earlier cases.

Impact of the appeal

Despite being fast-tracked, the appeal will further delay payouts and disputed claims for thousands of small businesses already struggling to stay solvent during the COVID-19 pandemic. With many of these businesses now facing a second national lockdown to curb resurgent COVID-19 cases, it makes the outcome of this appeal even more crucial.

Watch this space for another update once the outcome of the appeal has been announced.

This article was co-written by Sarah Milne, Trainee Solicitor.

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