In a boost for arts organisations hit hard by the Covid-19 pandemic, the High Court handed down a judgment on 15 September offering guidance on when they may be eligible for pandemic-related insurance payouts.
Museums and galleries crippled by falling revenues after being forced to close during lockdown were further devastated to learn that their add-on insurance policies did not cover Covid-19-related losses. To gain clarity, the Financial Conduct Authority (FCA) represented by Herbert Smith Freehills brought a test case against eight insurance companies.
Lord Justice Flaux and Mr Justice Butcher examined a sample of 21 different policy wordings. They found in favour of the FCA on a majority of key issues including coverage triggers under disease and ‘hybrid’ clauses, denial of access/public authority clauses, causation and ‘trends’ clauses. The judgment provides a helpful precedent for policyholders who might otherwise have needed to resolve these key issues on an individual basis with their insurers.
However, the High Court reached different conclusions on each of the 21 sample wordings. Herbert Smith Freehills partner, Paul Lewis, has advised that policyholders need to read the judgment very carefully to determine how the court’s ruling might apply to their particular policies. A rise in the price of shares in insurance companies Hiscox and RSA following the judgment also signalled they may not be preparing to make the enormous payouts arts institutions had hoped for.
Nevertheless, Lewis said “This is a really significant judgment. It brings guidance to how business interruption insurance wordings should operate in the context of the Covid-19 pandemic” and “the decision should bring welcome news to a significant number of policyholders”. As many as 370,000 policyholders could be affected by the judgment according to estimates from the FCA. It is thought each of these claims may run to tens of thousands of pounds.