In a previous blog post on 16th November 2020, we reviewed the High Court’s judgement in the Financial Conduct Authority’s (FCA) business interruption test case (FCA v Arch Insurance (Ltd) and others [2020] EWHC 2448 (Comm)). The case concerned the scope of cover provided by business interruption policies in the wake of the COVID-19 pandemic. The judgment was considered a win for policyholders, and the judgment was appealed by several of the insurance companies. 

Due to the importance and urgency of the issues raised, the appeals proceeded directly to the Supreme Court under the “leapfrog” procedure, bypassing the Court of Appeal. The Supreme Court handed down judgement on 15th January 2021; the court’s first judgment of 2021 (FCA v Arch Insurance (UK) Ltd [2021] UKSC 1).  

The issues

The appeals included challenging the High Court’s;

  • interpretation of the wording of various disease clauses, which cover losses relating to the occurrence of a notifiable disease within a defined geographical radius,

  • ruling on concurrent causes and insurers liability,

  • and the effect of ‘trends clauses’ on liability for losses incurred before local cases occurred.

The decision

The Supreme Court disagreed with the approach of the High Court in respect of the construction of the “disease clauses “ruling that each case of COVID -19 is a separate occurrence and therefore the disease clauses only cover cases occurring within the geographical limits set out in the policies. This however, had no real effect on the outcome due to the way in which the court handled causation.

On causation the Supreme Court held that although the nationwide measures were taken in response to all cases of COVID-19 in the country, not just the ones in the geographical radius of each business, all the cases were proximate causes of losses resulting in insurance policies responding to such losses. 

In relation to the ‘trends clauses’ the insurers argued that they were not liable to indemnify policyholders for losses caused by wider consequences of the pandemic which would have happened regardless of the occurrence of cases locally and restrictions on trading. The Supreme Court ruled that adjustments to the level of liability should only be made due to circumstances affecting the business which are unconnected to COVID-19. In reaching this conclusion the Supreme Court held that the decision in Orient Express Hotels v Assicurazioni Generali SpA [2010] EWHC 1186 had been wrongly decided.

The judgment confirms that many policyholders do have valid claims under the wording of their policies and insurers cannot use trends clauses to reduce the level of indemnity awarded for COVID-19 related losses.

The FCA website has a useful policy checker that can be used to see if a business interruption policy provides cover in light of the Supreme Court’s ruling.

The overruling of Orient Express Hotels may affect policies covering other types of widespread damage, such as fires, floods and storms.

Should you have any questions in respect of the above or require more information about bankruptcy proceedings generally, then please contact James Thornton or Anna Barfield from our Litigation and Dispute Resolution Team.

James Thornton – Head of Litigation and Dispute Resolution


Tel: 01925 217026

Anna Barfield – Trainee Solicitor


Tel: 01925 263273

The contents of this article do not constitute legal advice and are provided for general information purposes only.

The contents of this post do not constitute legal advice and are provided for general information purposes only