This morning saw the start of the High Court hearing of a test case brought by the FCA to clarify the extent to which business interruption insurance covers losses linked to COVID-19. The claim is being brought against a number of the big insurance companies and should address a subject that we have been discussing with many of our clients, since the start of the current pandemic.
To date the view has been that generally, unless specific wording in the lease helps, the landlord's loss of rent insurance will not cover COVID related loss of rent, because loss of rent is almost always linked to physical damage. That has left tenants still liable to pay, even where they have not been able to occupy their premises. Many businesses assumed their business interruption insurance would cover this but they have come up against the same obstacle - no insurance money without physical damage.
Whatever the outcome of this landmark case, it will be legally binding on the insurers that are parties to the case in respect of the interpretation of a representative sample of their policy wordings, and will provide persuasive guidance for interpretation of similar policy wordings.
We, along with many others in the property industry, are watching these proceedings closely and hope that they will bring some much needed clarity and consistency on this subject.
The FCA says the case will provide "clarity and certainty for everyone involved in these business interruption disputes, policyholder and insurer alike".