Legal action into Business Interruption

Financial Conduct Authority

On 15 January 2021, the UK Supreme Court announced its verdict on the appeals heard in the Financial Conduct Authority’s (FCA) business interruption test case. Although NFU Mutual was not part of this test case, we have welcomed the opportunity to deliver clarity for our policyholders.

We have reviewed both the High Court and subsequent Supreme Court rulings to see if issues decided in respect to any similar NFU Mutual policy wordings will affect any of our customers’ claims.  We can confirm that our position is unchanged following the appeal in the Supreme Court - our business interruption polices do not respond to COVID-19 related losses.

Further details on this decision can be found below.

NFU Mutual’s policy wordings

There was one NFU Mutual policy – ‘Hospitality Endorsement – Prevention of Access’ – which we identified as similar to those being assessed by the courts and might potentially be affected by the outcome of the legal process.

The High Court decided ‘Prevention of Access’ policies that included wordings relating to “an incident” - as NFU Mutual’s does – relate to” something which happens at a particular time, at a particular place, in a particular way ...” this clause is intended to cover local incidents, of which the typical examples are a bomb scare or a gas leak or a traffic accident.”

The High Court therefore found that the pandemic and the restrictions that followed could not be considered to be an “incident”, and therefore the judgment does not trigger cover for our customers.  

This ruling was not appealed by the FCA to the Supreme Court and so the High Court’s decision still stands.

In the case of the other non-damage BI policy cover extensions we offer;

  • we name the diseases covered in our Human Disease extension, so customers know which diseases are covered if they need to claim, and COVID-19 is not included in that list.  We also require the disease to be “on the premises” which was not considered in the test case.
  • Our cover for interruption caused by a Public Emergency has a clear exclusion for infectious or contagious disease. 

We understand this outcome will be disappointing for those affected.

For more information

If you would like further information on how we are helping businesses through providing payment holidays and mid-term adjustments, or to discuss your individual circumstances, please contact your local Agent. 

If you wish to refer your claim or complaint to the Financial Ombudsman Service, you will need to do so within six months of receipt of our final decision letter. Details of how to do this are contained in the letter. 

Read the full update from the FCA

A summary of the judgment is available from the FCA's solicitors, Herbert Smith Freehills LLP, on their website.

You can also find information on the test case on the Financial Ombudsman website.

NFU Mutual provided all the required information and policy documentation as part of the Financial Conduct Authority’s test case preparation and worked closely with the FCA and Association of British Insurers (ABI) to promote an expedited process and clarity for customers. 

Following the submission of NFU Mutual’s [non-damage] business interruption policy documentation to the FCA, the regulator determined not to put NFU Mutual policy wordings forward for the Court’s consideration. As such, NFU Mutual was not part of the test case in the High Court or subsequent appeal in the Supreme Court.

NFU Mutual offers non-damage BI cover in three extensions available under our commercial policy wordings.

We reviewed the relevant policy wordings issued to commercial customers and are of the opinion that the disruption caused by COVID-19 is not covered under any of these.

The three wordings are:

  • There is an extension available for Human Diseases which some commercial customers may have as part of their policy. This provides cover if premises need to close, or their use is restricted, as a result of a list of diseases specified in the customer’s policy document. Coronavirus (or COVID-19) is not included on that list.

    o   The test case did not consider any policy wordings which include a specified list of diseases. In addition, the test case did not consider policy wordings which require the disease to be at the policyholder’s premises; as our wording does.
  • Our commercial policies can also include some cover for interruption caused by a Public Emergency, but this cover specifically excludes infectious or contagious diseases. The test case did not consider any policy wordings which detail this specific exclusion.
  • Finally, some of our Select policies have an endorsement that covers “Prevention of Access” when an “incident” has occurred, in certain limited circumstances.

    o   The High Court decided ‘Prevention of Access’ policies that included wordings relating to “an incident” - as NFU Mutual’s does – relate to,” something which happens at a particular time, at a particular place, in a particular way...” this clause is intended to cover local incidents, of which typical examples are a bomb scare or a gas leak or a traffic accident.”

    o   The High Court therefore found that the pandemic and the restrictions that followed could not be considered to be an “incident”, and therefore the judgment does not trigger cover for our customers.

    o   This ruling was not appealed by the FCA to the Supreme Court and so the High Court’s decision still stands

    o   This endorsement therefore does not provide cover for the lockdown that has followed the outbreak of COVID-19. 

The judgments by the High Court and the Supreme Court have now been fully reviewed and we can confirm that the findings do not trigger cover for our customers. The NFU Mutual ‘Prevention of Access’ wording does not cover the lockdown that followed the outbreak of COVID-19 and therefore NFU Mutual’s position is unchanged.

Whilst the courts found in favour of customers for many of the issues in the test case, wordings similar to ours were either not included or have not been triggered by the findings.

We identified only one policy extension, ‘Hospitality Endorsement – Prevention of Access’ with wording similar to the sample policy wordings being tested in the case.

  • The High Court decided ‘Prevention of Access’ policies that included wordings relating to “an incident” - as NFU Mutual’s does – relate to,” something which happens at a particular time, at a particular place, in a particular way” .....” this clause is intended to cover local incidents, of which typical examples are a bomb scare or a gas leak or a traffic accident.”
  • The High Court therefore found that the pandemic and the restrictions that followed could not be considered to be an “incident”, and therefore the judgment does not trigger cover for our customers.
  • This ruling was not appealed by the FCA to the Supreme Court and so the High Court’s decision still stands
  • This endorsement therefore does not provide cover for the lockdown that has followed the outbreak of COVID-19. 

NFU Mutual will continue to review the development of the pandemic, how lockdowns are triggered and managed, and whether any of these occur in a manner which might either meet the court’s definition or trigger any of our policies covering business interruption losses.

We understand that this outcome will be disappointing for impacted customers during a period that has been extremely difficult, and some customers may wish to contest this conclusion.

If you make a complaint (or have already made one) then you may be able to ask the Financial Ombudsman Service (FOS) to consider the matter further. You will be given details about this at the conclusion of our complaint process.