Updated information about the FCA business interruption Test Case

On 1 May 2020, the Financial Conduct Authority (FCA) announced that it intended to obtain a court declaration to resolve uncertainty around whether certain non-damage business interruption insurance policies provide cover for losses arising as a result of COVID-19.

Although Aviva is not a party to the Test Case, it may affect policyholders insured under some business interruption policies that we provide cover for. Aviva fully supports the Test Case process, and the greater clarity and certainty that it will bring for those affected policyholders, so that valid claims can be paid as quickly as possible.

This page provides information about the Test Case and what it means for Aviva’s policyholders.

The High Court handed down its judgment on the Test Case on 15 September 2020.  On 2 October 2020, a hearing took place during which the court heard the parties’ arguments on the appropriate declarations to make and granted the FCA, six of the insurers and one of the intervenors¹ certificates for a “leapfrog” appeal to the UK Supreme Court. On 20 October 2020, the FCA made the final declarations and the relevant parties’ applications to appeal to the Supreme Court available on its website. On 2 November 2020, the Supreme Court granted permission to appeal to all those who had applied for it. The scope of the appeals covered some but not all of the questions addressed by the High Court judgment, leaving some parts of the High Court judgment unchallenged. The FCA published the written cases for the appeals and the written cases responding to those appeals on its website on 11 November 2020. The appeal was heard from Monday 16 to Thursday 19 November 2020.

On 15 January 2021 the Supreme Court handed down its judgment on the appeal, and on 13 July 2021 issued its final declarations. The judgment can be found here and the declarations can be found here. There are no further avenues of appeal from the Supreme Court so all rights of appeal have now been concluded in respect of the Test Case.

We are carefully considering the Supreme Court judgment and declarations, and any impact that this may have on claims and complaints under relevant Business Interruption policies on which Aviva provides cover and which we have previously identified as potentially affected by the outcome of the Test Case.

The FCA has published a list of insurers and policies which insurers including Aviva have reported may respond “in principle” as a result of the Supreme Court judgment. Please note that, as the FCA points out:

• “Inclusion in this list does not mean that the outcome on any particular claim for the below policy wordings will be affected. Each policy wording and policyholder’s circumstances will need to be considered on a case by case basis”. 
• “Where a policy is not included on this list, this may be for a number of reasons including but not limited to the policy wording being of a type not tested in the Test Case (e.g. containing an exhaustive list of diseases only or where the policy contains a relevant exclusion clause which was not tested)”. 
• “The list does not include policy wordings which are only held by fewer than 5 policyholders.”

The FCA will also periodically publish data on the number of claims settled and pending across the UK market, where the decision to accept claims was affected by the test case.

1. What is the Test Case?

The issues relating to the impact of COVID-19 on business interruption policies are complex.  By using a special court procedure, the FCA is seeking to obtain clarity on a much quicker timescale than would otherwise be possible. 

Following consultations with insurers, policyholders and insurance brokers, the FCA chose a selection of policy wordings which it considered is representative of the most important issues in dispute between policyholders and insurers². These policy wordings, and a selection of the insurers which provide insurance on those policy wordings, were included within the scope of the Test Case.  

Here is a summary of the key Test Case developments so far:

We will keep this summary updated as the Test Case progresses. The High Court handed down its judgment on the Test Case on 15 September 2020, which can be accessed here. The Supreme Court handed down its judgment on the appeal of the Test Case on 15 January 2021, which can be accessed here and issued its final declarations on 13 July 2021, which can be accessed here. We are carefully considering the Supreme Court judgment and declarations and, where appropriate, will be providing updates to our policyholders and updating this page with further information in due course.

You can also find additional information and documents on the FCA’s webpage relating to the Test Case here. The FCA’s webpage includes a feature that allows you to subscribe for email updates from the FCA you may want to subscribe so that you stay updated on developments relating to the Test Case.

The Financial Ombudsman Service has also provided some information about the potential impact of the Test Case on policyholders, which can be accessed here.

2. What does the Test Case mean for Aviva policyholders?

Although Aviva is not a party to the Test Case, the outcome of the Test Case may affect Aviva’s review of claims made under certain business interruption policies we provide insurance cover for:

• Aviva provides insurance on one of the policy wordings which is specifically being considered by the Test Case (RSA type 4 of 4 (Marsh / Jelf Material Damage & BI – Resilience)).
• The Test Case will also provide guidance on the interpretation of some other business interruption policies that Aviva provides insurance cover for.

3. Which policies insured by Aviva may be affected?

We have considered which of our relevant Business Interruption policies that we provide cover for may be affected by the outcome of the Test Case. In particular, we reviewed policies issued before 17 June 2020 which provide cover for business interruption caused by:

• The presence of a disease at, or in the vicinity of, an insured premises (a disease trigger); and/or
• The action of the government or other authority which prevents or restricts the access or use of an insured premises (a denial of access trigger).

A list of policies which may be affected by the Test Case, as published on the FCA’s webpage, is available here. Inclusion on this list does not necessarily mean the outcome on any particular claim for the policy wordings listed will be affected.

4. What are the implications of the Test Case for my clients' claim or complaint?

We have written to policyholders who have made claims or complaints for non-damage business interruption losses related to the coronavirus pandemic under relevant business interruption policies to inform them whether or not their claim or complaint may be affected by the Test Case, and the implications of that.

We are revisiting any claims, including those we have declined, and complaints relating to COVID-19 and decisions made on affected policies to ensure they are handled in line with the court’s decision.

If you/your client have received a communication that their claim or complaint “will not be affected by the Financial Conduct Authority’s forthcoming Test Case process”, this remains the case and the Test Case judgment will not affect the decision we have made.

If you/your client have received a communication that their claim or complaint “may be affected by the Financial Conduct Authority’s forthcoming Test Case process”, this remains the case. We will contact you/them further once we have assessed the impact of the Supreme Court judgment on their claim or complaint.  We understand that this has been and continues to be a difficult and concerning time, and are working to review the position for claims and complaints that are potentially affected by the Supreme Court judgment. If you/your client received a communication that, in light of the proposed scope of appeals, we consider that the issues that were considered by the Test Case that are relevant to our assessment of their claim or complaint have already been finally resolved, and would not be affected by the outcome of the appeals in the Supreme Court, this remains the case and the Supreme Court judgment will not affect the decision we have made.

You can still refer complaints to the Financial Ombudsman Service. If your clients' policies are affected by the Test Case, any time limits to make such a complaint will be suspended during the Test Case. 

5. Do I/my clients need to do anything?

If you/your client have already made a claim or a complaint, you do not need to do anything as the FCA is taking the Test Case on behalf of policyholders.

We are reviewing our decisions to ensure they are in line with the High Court’s and Supreme Court’s judgments. If the position on your clients' claim or complaint has changed, we will write to you/them.

¹ Arch Insurance (UK) Ltd; Argenta Syndicate Management Ltd; MS Amlin Underwriting Ltd; Hiscox Insurance Company Ltd; QBE UK Ltd; Royal & Sun Alliance Insurance Plc; Hiscox Action Group.

² Arch Insurance (UK) Limited, Argenta Syndicate Management Limited, Ecclesiastical Insurance Office plc, Hiscox Insurance Company Limited, MS Amlin Underwriting Limited, QBE UK Ltd, Royal & Sun Alliance Insurance plc and Zurich Insurance plc will be taking part in the case.