Case Law

Covid-19 BI Update: Supreme Court to hear FCA Test Case appeal on 16-19 November 2020

3 November 2020
By Aaron Le Marquer

Further to the ‘leapfrog’ applications for appeal filed by the FCA and 6 insurers in October, the Supreme Court has now granted the applications, and listed the matter to be heard from 16-19 November 2020.

Whilst RSA has notably abandoned its appeal in relation to the RSA4 (Resilience) wording, it appears that the remaining insurers have maintained their appeals in full as set out in the original requests for leapfrog certificates. As a result, the majority of the other 21 wordings considered in the Test Case remain subject to appeal by insurers and/or the FCA to a greater or lesser degree.

The Supreme Court has summarised the scope of the appeal as follows:

1. certain matters of construction relating to:

    • “Disease Clauses” (i.e. those which can be triggered by the occurrence of severe acute respiratory syndrome coronavirus 2 (“COVID-19”), typically within a specified distance of the insured’s premises);
    • “Prevention of Access Clauses” (i.e. those triggered by public authority intervention preventing access to, or use of, premises as a result of COVID-19); and
    • “Hybrid Clauses” (i.e. those clauses which contain wording from both Disease and Prevention of Access Clauses), and

2. whether the Divisional Court was correct:

    • to apply certain counterfactual scenarios in relation to the operation of the clauses in relevant policies which provided for loss adjustments (the “Trends Clauses”); and
    • in its analysis of Orient-Express Hotels Ltd v Assicurazioni Generali S.p.A.

The last point is perhaps the most contentious and far-reaching, since in the Test Case judgment Flaux LJ and Butcher J found that they were able to distinguish the facts and circumstances of the Test Case from the findings in Orient Express, and did not therefore need to apply it, but that if it had come to it they would have found that it was wrongly decided. Since the Supreme Court panel includes both Lord Hamblen (who as Hamblen J issued the original judgment in Orient Express), and Lord Leggatt (who sat on the tribunal which issued the arbitral award from which the Orient Express case was appealed), the hearings will make for interesting viewing.

Most importantly, whichever way the decision goes, the Supreme Court’s ‘final word’ on the issue of wide area damage, trends clauses and the decision in Orient Express will bring some welcome clarity and finality to the issue which can only benefit policyholders and insurers alike.