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Information for UK policy holders on the Financial Conduct Authority’s Business Interruption test case

As the COVID-19 pandemic has evolved, AXA XL is alert to the significant challenges facing our clients. The pandemic has led to widespread disruption and business closures, and we recognise that clients are keen to understand if their business interruption (BI) insurance policy will respond. This page contains information about the Financial Conduct Authority’s Business Interruption test case.

What is the FCA test case

In May, the Financial Conduct Authority (FCA) announced their intention to obtain a court declaration, as part of a test case, to resolve causation issues and contractual uncertainty around the validity of many non-damage BI claims made due to the coronavirus (COVID-19) pandemic.

The test case considered a representative sample of non-damage BI policy wordings to determine the interpretation of certain clauses within those policies and whether they provide cover for COVID-19.

The timetable of proceedings

Following a court order on 16 June, the test case proceeded on the following timetable:

9 June

FCA started claim in the High Court

20-23 July and
27-30 July

8 day court hearing before Lord Justice Flaux and Mr Justice Butcher

15 September

The High Court published its judgment

After hearing the test case brought by the Financial Conduct Authority on Business Interruption wordings, the High Court published its judgment on 15 September 2020.

We are now awaiting confirmation as to whether any of the parties will seek to appeal the judgment and, if so, what aspects. Final resolution of the test case will not be achieved until any appeal(s) have either been concluded or the time for appealing has expired. Once it is clear which, if any, aspects of the case are being appealed, AXA XL will reassess relevant claims / complaints, with a view to applying the outcomes in the test case, so far as is relevant.

Implications for AXA XL customers

AXA XL’s insurance carriers were not defendants in the test case. However, the outcome will provide us with guidance as to the interpretation of similar policy wordings, subject to English law.

The court judgment may affect the outcome of your claim if:

  • the specific wording of your policy was reviewed as part of the test case, or
  • there were points being considered by the test case that are relevant to your policy wording.

Working with our business partners, we have written to all clients with claims or complaints for BI losses related to COVID-19 under relevant non-damage BI policies and advised whether or not you are potentially affected by the test case.

Why isn’t your policy potentially affected by the test case?

The test case is not intended to encompass all possible claims under non-damage BI policies and claims. Where we do not consider that your policy is potentially affected by the test case, we have written and told you why.

What if your claim has already been declined or you have made a complaint?

If your claim has been declined or you have made a complaint and received a final decision letter, then the decision you have been given remains our final decision at the current time. However, once the test case reaches final resolution, we will consider whether our decision needs to be revised.

We will write to you again at that time. You do not need to take any further action.

If you have made a complaint but not received a final decision letter, and our view is that your claim is one where the outcome may be potentially affected by the test case, then we will postpone our decision on your complaint pending the outcome of the test case. This means that we will not send you a final response within eight weeks as indicated in our Complaints Process document. A decision on your complaint will be taken promptly on final resolution of the test case.

If part of your complaint is not covered by the test case, we will continue to deal with that part of your complaint and we will contact you separately about it.

What if you have a claim in progress or you have not made a claim?

While the Court proceedings continue, we will continue to consider all claims made and give you our view on how your policy responds, including those relating to policies that are potentially affected by the test case.

On final resolution of the test case, we will re-visit our claims decisions to ensure that they are in not impacted by the ruling of the Court. We will write to you again at that time to confirm whether or not we consider that the position of your claim has changed. You do not need to take any further action.

If you have not yet made a claim and wish to await the conclusion of the test case, we will handle your claim at that time, taking into account any impact of the ruling of the Court.

Your Financial Ombudsman Service (FOS) rights

Your FOS rights are not affected by the test case. If you are unhappy about the outcome of your complaint, you can still refer it to the FOS free of charge.

The FOS has provided information on complaints related to BI insurance, which you can find here.

Staying informed

If you are a client who is potentially affected by the test case, we will write to update you when the outcome is known.

We will also keep this page updated to reflect any key developments in the court proceedings.

Further information on the test case from the FCA can be found here.

You may wish to subscribe for email updates on BI and the test case from the FCA here or via their webpage.