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Supreme Court gives judgment in business interruption insurance test case: 7KBW team acts for Hiscox

15th Jan 2021

The Financial Conduct Authority v Arch Insurance (UK) Limited and others [2021] UKSC 1

Jonathan Gaisman QC, Adam Fenton QC and Douglas Grant, with Miles Harris of 4 New Square represented Hiscox Insurance Company Limited (“Hiscox”) in the Supreme Court in the expedited test case brought by the Financial Conduct Authority (“FCA”) to determine whether sample business interruption policies respond to losses arising out of the COVID-19 pandemic.

The FCA commenced proceedings in June 2020 under the Financial Markets Test Case Scheme, a scheme designed to resolve issues of general importance on which immediately relevant and authoritative English law guidance is needed. An urgent trial took place in July 2020 before Flaux LJ and Butcher J. The judgment of the High Court can be viewed here.

Due to the importance and urgency of the case, the appeals against the High Court’s decision proceeded directly to the Supreme Court under the “leapfrog” procedure, bypassing the Court of Appeal. The Supreme Court held an expedited, remote hearing on 16-19 November 2020.

The Supreme Court dismissed the insurers’ appeals and allowed the FCA’s appeals. Lords Hamblen and Leggatt gave the main judgment, with which Lord Reed agreed. Lord Briggs gave a separate concurring judgment with which Lord Hodge agreed.

This is a landmark decision on the law of causation. The Supreme Court held that each individual case of COVID-19 was a separate but equally effective cause of the government measures taken in response to the pandemic, and that it was unnecessary to establish “but for” causation. The Supreme Court also overruled the decision of Hamblen J (as he then was) in Orient-Express Hotels Ltd v Assicurazioni Generali SpA [2010] EWHC 1186 (Comm).

The judgment can be viewed here.

Jonathan Gaisman QC, Adam Fenton QC and Douglas Grant were instructed by Allen & Overy LLP.