FCA Test Case
The FCA Test Case
The Financial Conduct Authority (FCA) brought a Test Case on behalf of policyholders, aimed at resolving contractual uncertainty around the validity of many business interruption claims in relation to COVID-19. The FCA originally sought a judgment from the High Court in respect of the interpretation of a representative sample of non-damage business insurance policy wordings which, subject to any appeals, would become binding on the insurers that are parties to the Test Case. It is important to note that the claims / complaints of individual policyholders were not under consideration as part of the Test Case.
The trial at first instance for the Test Case took place before the High Court over eight days during the last two weeks of July and was heard by Lord Justice Flaux and Mr Justice Butcher (the Judges).
At 10.30am on 15 September 2020, the High Court formally handed down its judgment and a copy has been published to the FCA’s website. The Judges ruled in favour of the FCA acting on behalf of policyholders, in relation to the Argenta Syndicate Management Limited (ASML) policy wording which was subject to the test case.
On 02 October 2020, the Court held a consequentials hearing, during which the Judges made a series of declarations as to the effect of their judgment. A copy of the judges' order can be found on the FCA’s website.
The Judges also granted ‘leapfrog’ certificates for an appeal directly to the Supreme Court to those parties who had applied for one, which included both the FCA and ASML. Copies of all parties’ applications for permission to appeal, including proposed grounds of appeal, were published to the FCA’s website on 20 October 2020, and other documents relevant to the appeal have since been published as well.
On 02 November 2020, the Supreme Court granted permission to appeal to all parties who had applied, and the appeal hearing took place over 4 days from 16 November - 19 November 2020 before a panel comprising of 5 Supreme Court Justices; namely Lord Reed, Lord Hodge, Lord Briggs, Lord Hamblen and Lord Leggatt (the Justices).
At 9.45am on 15 January 2021, the Supreme Court formally handed down its judgment in respect of the appeal. A copy of the judgment can be found on the Supreme Court’s website and on the FCA’s website. In summary, the Supreme Court has ruled in favour of the FCA acting on behalf of policyholders in respect of the ASML wording which was subject to the Test Case. Further details of the Test Case, including all of the steps taken by the FCA Test Case to date, are available on the FCA’s website.
On 17 June 2020, the FCA published its finalised guidance, which sets out the FCA’s expectations for insurers when handling claims and complaints relating to relevant non-damage business interruption policies during the Test Case. The finalised guidance defines ‘final resolution’ of the Test Case as being that time when the Court has determined the questions in the Test Case and after all rights of appeal have been concluded. Therefore, now the Supreme Court has handed down its judgment and subject to any final consequentials hearing or declarations order in which the Supreme Court will make declarations as to the effect of its judgment, final resolution has been reached. Therefore, ASML will proceed to determine all outstanding claims and complaints, applying the Supreme Court’s judgment in so far as possible and will write to policyholders individually with its decision.
Further information on ASML's approach is set out in the FAQs below.
Timetable of proceedings
A summary of the important dates for the Test Case are set out below.
|09 June 2020||The FCA initiated proceedings in the High Court|
|16 June 2020||The Court fixed the timetable for the case and other procedural matters at the first case management conference|
|23 June 2020||Insurers filed their Defences|
|26 June 2020||Second case management conference|
|03 July 2020||FCA filed its Reply|
|20-23 July and
27-30 July 2020
|Test Case was tried over 8 days at a court hearing before Lord Justice Flaux and Mr Justice Butcher|
|15 September 2020||The High Court handed down its judgment|
|02 October 2020||A consequentials took place before Lord Justice Flaux and Mr Justice Butcher, during which the Judges made certain declarations in respect of their judgment. The Judges also granted ‘leapfrog’ certificates to seek permission to appeal directly to the Supreme Court to all parties who had applied for one, including the FCA and ASML.|
|20 October 2020||FCA published copies of all parties’ applications for permission to appeal to the Supreme Court on its website.|
|02 November 2020||Supreme Court grants permission to appeal on all grounds and confirms the dates for the appeal hearing.|
|16-19 November 2020||Supreme Court appeal hearing took place over 4 days before a panel of 5 Supreme Court Justices, comprising of Lord Reed, Lord Hodge, Lord Briggs, Lord Hamblen and Lord Leggatt|
|15 January 2021||The Supreme Court handed down its judgment at 9.45am. Subject to any consequentials hearing or declarations order, final resolution of the Test Case was reached.|
Keeping you informed
For customers affected by the Test Case, we have previously contacted you directly to confirm how your claim / complaint may be impacted by the Test Case and to provide you with updates on the Test Case more generally.
In accordance with the FCA’s finalised guidance for firms, the FCA publicly set out its expectation on its website that “Every policyholder who has made a claim or complaint that is potentially affected by the judgment should receive an update from their insurer within 7 days” of the High Court’s judgment being handed down (i.e. by 22 September 2020). As such, we provided individual update letters to all policyholders whose claim / complaint may be affected by the judgment. If we have previously informed you that you have a “potentially affected claim / complaint” and you do not believe that you received an update communication from us in the 7 days following the handing down of the High Court’s judgment, please contact us directly at BITestCase@argentagroup.com.
We also wrote to all affected policyholders once permission was granted by the Supreme Court for the appeal hearing to take place and we will write again now that the Supreme Court’s judgment has been handed down.
In order to receive any updates from the FCA as soon as they are published, you may wish to register for email updates from the FCA on the progress of the Test Case, which you can do through its website.
The Financial Ombudsman Service has issued its own guidance on business interruption insurance and Covid-19, which is available on its website.
Page last updated on 15 January 2021