UK’s BI ruling will have international impact and see more claims paid

The recent judgment on Covid-19-related business interruption (BI) insurance by the UK’s Supreme Court will affect policies and laws well beyond the UK, and means policyholders from various jurisdictions are more likely to get claims paid, according to legal experts. The 15 January UK Supreme Court judgment found in favour of policyholders that had been denied cover for Covid-19-related BI losses, dismissing all appeals lodged by insurers. The court decided that non-damage BI wordings should respond to Covid-19, and ruled favourably on the quantification of loss. The upshot is more BI claims will get paid. The ruling will have ramifications for policyholders beyond the UK, as many international companies hold insurance subject to English law, while other jurisdictions could be influenced by the UK court ruling, according to Aaron Le Marquer, a partner at Fenchurch Law, which works exclusively for policyholders and brokers. “Many multinationals will have direct or reinsurance cover in the London market that will be [in the scope of] the Supreme Court judgment, while Commonwealth jurisdictions will be guided by the decision. There will also be interest in the decision in the US and Europe, although the judgment will not carry weight as precedent,” he said. Cover purchased from insurers – including those in London and international markets – based on clauses examined by the Supreme Court could respond to Covid-19 BI losses, lawyers say. This would also apply to lockdowns outside the UK. The Supreme Court decision covers the interpretation of policies under English law, explained Clive O’Connell, partner and head of insurance and reinsurance at McCarthy Denning. Any policies that are subject to English law will be read and interpreted in accordance with the judgment, whatever the nationality of the policyholder or insurer, he said. There is also some speculation that courts in other jurisdictions may follow the decision, said Mr O’Connell. “English law is the most developed in the area of insurance and is often looked to by other jurisdictions – even non-Common Law jurisdictions – for guidance,” he said. At the end of last year, South African insurer Guardrisk had its BI appeal rejected by the country’s Supreme Court. Guardrisk was appealing a court decision from earlier in the year that said it was liable to pay Covid-19-related BI losses for one of its small business policyholders. In making its ruling, the South African Supreme Court of Appeal considered the UK’s Financial Conduct Authority (FCA) test case. The Supreme Court rulings are likely to influence BI claims in other countries, agreed Naz Gauri, principal associate in Eversheds Sutherland’s insurance litigation team. “The [FCA] ruling will undoubtedly have an impact on foreign legal jurisdictions encountering similar legal issues of policy interpretation,” he said. “Other jurisdictions are monitoring the FCA test case closely to the extent that similar wordings are available in national markets and their courts. Countries with similar legal systems to the UK, such as the US, Australia, New Zealand and Ireland, have been watching the test case and I expect they will be influenced by the outcome in a significant way,” he said.

UK’s BI ruling will have international impact and see more claims paid

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