Insurers have so far paid out £472m to policyholders who claimed for losses resulting from the closure or partial closure of their businesses in the wake of the pandemic. That figure, however, represents less than estimated claim total value by the Association of British Insurers in February 2021 – and the final claim value could be significantly higher.

The FCA has published helpful guidance which will be of particular use to Business Insurance (BI) policyholders who have found their claims challenged by Insurers on a number of technical points. The full guidance can be found at https://www.fca.org.uk/publications/finalised-guidance/business-interruption-insurance-test-case-proving-presence-coronavirus, but we summarise some of the key points below:

• Many BI policies require the policyholder to prove presence of a disease within a particular area. That can be difficult, even though it is self-evident that most areas of the country have been affected. The FCA guidance helpfully sets out how policyholders should proceed in the following cases:
• Policyholders whose policies require them to demonstrate that there was at least one case of COVID-19 (C-19) within a 25-mile radius of the premises should seek to use the following types of evidence (set out in the order in which they should be followed):

1. 1. Specific evidence (i.e. newspaper reports of a case near the premises);
   2. NHS data on deaths due to C-19;
   3. Office for National Statistics (ONS) data on deaths due to C-19;
   4. Reported cases of C-19 in different areas.
   5. If none of the above is available, the FCA suggest either using an “undercounting methodology” (in other words arguing that testing was limited/ non-existent before the first national lockdown) or using a “geographical distribution methodology” (where actual or estimated C-19 infections are averaged across an area. The FCA will shortly publish a C-19 Calculator to assist with this approach.

• Policyholders whose policies require them to demonstrate that there was at least one case of COVID-19 within a 1-mile radius of the premises should start with (i) above. If specific evidence is hard to come by, it is suggested that policyholders search data published by the ONS showing the number of C-19 deaths in what are termed “Middle Super Output Areas” (MSOAs) – these are small areas with an average population of around 7,200. The Government started publishing data for MSOAs recently hence this data is not mentioned in the High or Supreme Court judgments. MSOA data is especially useful for policyholders with a 1-mile radius requirement as it shows reported cases within a small geographical area. If the policyholder is unable to obtain MSO data, they should look to NHS data. If a policyholder can establish cogent evidence of one of these types, there is no need to establish other types of evidence;
• Vicinity requirements – The High Court confirmed that the particular definition of “vicinity” in the disease clause of the policy type referred to in the FCA test case as RSA4 meant that C-19 occurred within the “vicinity” of all premises in England and Wales on 31 January 2020, the date of the first positive test for C-19 in England. Policyholders with this type of policy do not need to prove the presence of C-19.The FCA considers that other policies which require the presence of C-19 within an area defined as “vicinity of” - or in a similar way – should benefit from the same approach.
• Policies requiring the occurrence of a “notifiable disease” – The High Court confirmed that C-19 occurred on 5 March 2020 in England and on 6 March 2020 in Wales, within Hiscox 1-3 policies. Policyholders with these policies do not need to take any further steps to prove the presence of C-19. Where other policies have similar wording and refer to “notifiable disease” the FCA considers the same approach should be used.

The above is just intended as a summary of the longer FCA guidance note.

The Guidance is not binding and may be challenged by insurers. It is strongly recommended that any prospective claimants review the note and seek specialist advice if they have any questions.

The specialist team at Penningtons Manches Cooper are on hand to advise. To find out more about how we can help you:

Visit our website and register your interest www.penningtonslaw.com/bi-claims

Call us to discuss your claim on 020 7457 3009

• We will review your policies free of charge to see if there is cover
• We will advise you on whether your claim qualifies for further action
• If you have a potential claim you may wish to join our group action on a “no win, no fee” basis.
• We can also represent claimants on an individual basis.