Property Insurance Update – Particulars of Claim Filed with UK High Court

The Financial Conduct Authority in the United Kingdom has filed its Particulars of Claim in the High Court. It sets out nineteen declarations being sought from the High Court as to the application of seventeen business interruption policies to the COVID-19 business closures. The declarations are intended to cover the majority of business interruption wordings in dispute as identified by the Financial Conduct Authority’s team of Queens Counsel which reviewed submissions from over 1200 policyholders.

A summary of the declarations are outlined in this update and show the complexity of the issues at play in COVID-19 business interruption claims. These include the evidence as to COVID-19 being present at the premises, assumptions as to whether COVID-19 was present within the designated vicinity area and whether the loss is minimised by COVID-19 economic effects such as social distancing.

Disease Covers

When COVID-19 became a notifiable disease or occurred

1. COVID-19 is a human infectious and contagious disease COVID-19 became ‘notifiable’ in England and Wales on 5 March 2020.
2. The initial outbreak was 31 December 2019, alternatively 31 January 2020, alternatively such later date as the Court may specify.
3. COVID-19 ‘occurred’ on 5 March 2020.

When COVID-19 occurred within the vicinity

1. COVID-19 occurred within the Vicinity:
   • of all premises on 31 January 2020.
   • alternatively when COVID-19 occurred within a more localised area surrounding the insured premises (such as within a 1 mile or 25 mile radius).

Evidence of COVID-19 at premises

1. COVID-19 was sustained, manifested, and occurred wherever a person had contracted COVID-19, whether or not it was verified by medical testing or a medical professional and/or formally confirmed or reported to the PHE and whether or not it was symptomatic.

Evidence of COVID-19 in the vicinity

1. COVID-19 was sustained, or manifested, or occurred within a given radius of the premises, and there was an incident within that given radius, when such a person or persons who had contracted COVID-19 was/were within that radius of the premises.
2. As to the presence of COVID-19, on the balance of probabilities:
   • Based on Reported Cases, COVID-19 was sufficiently widespread that it was present within every LTLA in England by at least 31 March 2020, but in some LTAs by 16 or 23 March 2020.
   • A case of COVID-19 was present in the Relevant Policy Area as at a particular date based on any one of the following methodologies (individually or in combination):
     • If the COVID-19 related deaths in a local authority area reported by the Office for National Statistics, when averaged across that area, have occurred within the Relevant Policy Area.
     • If Reported Cases in a regional, UTLA or LTLA Zone, when averaged across that Zone, have occurred within the Relevant Policy Area.
     • If Reported Cases in a regional, UTLA or LTLA Zone, when uplifted to take account of the Undercounting Ratio applicable.
     • If there is a hospital within the Relevant Policy Area and the NHS hospital death data shows a COVID-19 death at that hospital.
     • If the Government regional hospital COVID-19 admissions data, when averaged out across the hospitals in the region, shows that admissions have occurred at a hospital within the Relevant Policy Area.

Emergency and danger to health

1. There was an emergency likely to or which could endanger life, danger, incident, threat or risk of damage or injury and health reasons or concerns in the vicinity of all premises in the UK and within 1-mile of all premises in the UK from 3 March 2020, alternatively 12 March 2020.

Public Authority Covers

Public authority actions

1. The advice, instructions and regulations [set out in paragraph 18 of the Claim] were all actions of government, governmental authority or agency, public authority, competent public authority, civil authority, competent civil authority and/or statutory authority.
2. The actions were in the Vicinity of all premises in the UK.
3. The advice, instructions and regulations as to social-distancing, self-isolation, lockdown and restricted travel and activities, ‘staying-at-home’ and home-working given on 16 March 2020 and on many occasions subsequently amounted for all businesses on that date, alternatively on such subsequent date as is to be determined by the Court for specific policy wording variances.

Specific business categories such as restaurants, retail and travel

1. Further or alternatively, where a business in certain business Categories was ordered on 20, 21, 23, 24 and/or 26 March to close the premises or cease the business, or only to provide a take-away/mail order/online business there was prevention of access or use (or other wording variations such as hindrance, restrictions and closure).
2. Further, from 16 March 2020, given the Government requirements including to cease travel and self-isolate, alternatively from 24 March 2020, there was for certain business Categories interruption or closure or restrictions as a result of COVID-19 manifesting itself within 25 miles provided it did so manifest in that radius.

Exclusions

1. The following exclusions are inapplicable:
   • pollution
   • contamination
   • competent local authority exclusion.

Causation and Trends Clauses

COVID-19 is the proximate cause

1. The COVID-19 and public authority occurrences that trigger cover are all proximate causes of the resulting loss and all the causal relation wordings (‘resulting from’, ‘as a result of’, ‘directly resulting from’, ‘resulting solely and directly from’, ‘caused by’, ‘arising from’, ‘in consequence of’, ‘whereby’, ‘following’, ‘due to’ etc) are satisfied in all cases.

Loss arising from large scale closures

1. The applicable causation tests are satisfied where the business interruption losses would not have been suffered had the COVID-19 pandemic and associated public authority actions not occurred.

Trends clauses do not apply to extensions

1. The trends clauses contained in the business interruption sections of the policies are not applicable to claims under the item(s) of additional cover or extension(s) of cover.

COVID-19 economic effects from self-isolation etc not relevant

1. Losses do not fall to be reduced under the trends clauses or otherwise by reason that but for the business closure or particular Government measures all or the majority of the losses would have been suffered anyway as a result of the broader COVID-19 pandemic, the lockdown, self-isolation, social distancing, or other national measures imposed by the Government. Alternatively, if this is wrong, in cases of disease or action required to be within the Relevant Policy Area the correct counterfactual is to assume that there is no disease or action (as applicable) within that Area but that the disease or action continued outside it, and there remains cover for losses that would not have been suffered had the Relevant Policy Area been disease/action-free, including on the counterfactual (which in some cases may increase the indemnifiable amount) that there was an ‘island’ of normal disease-free trade in a ‘sea’ of disease/public action.

Other

1. Further declarations as apply to specific policies only.

Further Information

For the full details of the Particulars of the Claim: https://www.fca.org.uk/publication/corporate/bi-insurance-test-case-particulars-of-claim.pdf