A test case brought by the FCA against eight insurers could have significant consequences for insurers, brokers and policyholders. We report on the latest from the High Court… 

16.15: Proceedings finish for the day.

16.14: The court is preparing to conclude, Edelman will start afresh with his response in the morning, which will be followed by the interveners.

16.09: Edelman is now going to respond to Salzedo’s final point. Post-notification losses that are recoverable, during the adjustment process, it should be considered when the disease was emerging. Edelman clarifies that it is not the FCA’s case that any policy identifying notifiability as a trigger, should not recover losses prior to this date. Lord Justice Flaux said policyholders cannot claim for losses prior to Covid-19 becoming a notifible disease as its policy wordings specifically cite a notifible disease as the trigger.

16.08: Salzedo concludes the submissions on behalf of Argenta.

16.06: Most Covid BI claims will fail because the losses were not proximately caused by an insured peril. In claims where there are legitimate losses, they only apply after the date of notifibility. Salzedo said the FCA disagreed with this. 

16.00: References day one of the trial, Edelman asked about losses prior to the Covid-19 pandemic and declarations. Salzedo makes an objection. For a simple disease clause like Argenta, Salzedo said there is confusion between the FCA stating the trigger as being Covid-19 as a notifible disease yet the FCA also discusses pre-coronavirus impacts.

15.57: What is the damage, loss and insured peril, Salzedo asked? The damage in a BI claim will be different to the damage in a property claim.

15.55: The ‘but for’ argument and the Orient Express case is now discussed. It is common ground that the defined term ‘damage’ in Argenta’s trend clause is to refer to relevant peril in instances where peril is not ‘Damage’, which includes the instances that are being dealt with. Agrees with the other submissions on counterfactuals.

15.53: Salzedo now touches on exclusions, there are three. The FCA accepts that all three apply in principle. 

15.50: No one instance of Covid-19 caused the pandemic or the associated lockdown, said Salzedo. The FCA, on the other hand, said that the local occurances are the cause of the pandemic, yet Salzedo does not agree. Added that this view contrasts Edelman’s secondary causation argument. Millions of causes is completely different.

15.49: The remote cause is so potent that it could only be the cause of the proximate loss in some instances, however the pandemic is not an insured peril, Salzedo added. He said the FCA is wrong.

15.46: The simple Argenta clause deals with proximate cause and this is what is required said Salzedo. Lord Justice Flaux pinpoints this, clarifying that a notifible disease has to have occurred within 25 miles. 

15.43: The causal chain is sometimes described as a web, add the judges, questioning Salzedo’s approach. He said it is a chain and that the FCA is creating a ‘strange process’ of going up the chain one way and then coming down a different way. It could also be described as a jigsaw. 

15.42: The FCA said the policyholders can trace their claim to a remote peril, Salzedo said this goes up and down the causal chain via different routes. 

15.40: The five conditions that cause loss are not insured perils, said Salzedo, including the event that caused the five conditions. The vast majority of claims under Argenta 1 will fail to qualify causation as there was not an occurance of the disease within a 25 mile radius. 

15.39: The pandemic has caused everyone to change their behaviours, including customers. Argenta policyholders’ customers include foreign tourists.

15.36: Throw causal issue into relief - Argenta doesn’t shy away from it. There is a global pandemic of Covid-19 and it has had many damaging consequences, Salzedo said. The pandemic has caused instances of the disease to be within 25 miles of the insured premises in some cases. It is common ground that causation runs in the way Argenta says, he added. Distinction being drawn by the FCA between occurances generally within any and all 25 mile circles and occurances within any particular 25 mile circle that are caused by the pandemic - from a policyholder perspective, the pandemic has caused the occurance within the relevant 25 mile radius. This is common ground.

15.34: Salzedo discussed whether the cases within the radius were signifcant enough to cause a local lockdown, such as the one in Leceister. Need to look at proximate clause, said  Salzedo.

15.32: Argenta accepts that its clause could cover certain types of claims, including ones in Leceister, Salzedo said. The insired peril does work concerning a range of certain facts around Covid-19. 


15.27: Salzedo accuses the FCA’s case of being unclear for not answering the causal connection question. In the case of a brand new disease like Covid-19, that causal link of being part of the same outbreak is trivial to establish as every case is part of the current outbreak. The FCA is demoting the 25 mile requirement into something arbitrary.


15.22: To give meaning to the 25 mile limit, there has to be a causal relationship between the local occurance and the impact on the business, said Salzedo. But what is the causal connection? 

15.14 The court takes a short break and will reconvene shortly 

15.09 Salzedo says that any policyholder covered by Argenta would assume they do not have cover within a 25 mile radius, but the exception is the jigsaw clause. 

15.03 Now on to Argenta. Simon Salzedo QC speaks about holiday homes, the main point it has in this case is the jigsaw point. Speaking about proximate cause in relation to Argentas, 25 miles is given as a radius in the FCA’s submission, Salzedo says “there is a pandemic”.

15.00 Howard points out that how the trends clause operates and the business interruption clause actually contradicts Edelman’s point. 

14.51 The effect of the insured peril, Howard draws attention to Edelman’s submission on Orient Express arguing that as long as there was a downturn in bookings before the hurricane hit the hotel. But the difference between the damage caused to the hotel from the hurricane and the loss caused from the hurricane itself needs to be distinguished. Edelman said previously that ”Covid-19 is like an approaching hurricane,” but Howard says this is not correct. 

14.45 Speaking about the concept of the ‘burden of proof’ Howard discusses in an example about a case of fraudulently certified pipes, he divulges. In this case it bears the burden of proof by balance of probabilities. But this case collapsed at the court of appeal. Much like the argument for Silver Cloud, both are examples of improper use of authorities.

14.35  Questioning Mr Edie’s earlier assertion that “London was the proximate cause of the national lockdown” Howard says that London was a “but for” cause to the lockdown, it is contrary to the FCA’s pleaded case and contrary to the regulator’s argument therefore whole premise of test case that it is not possible to take any 25-mile radius. The danger in a case like this is trying to decide facts instead of trying to decide questions of principle. Therefore London could not be the driver 

14.24 It is an argument of construction, but we have also seen that all ways for causation that have been put forward do not work, what next? The bizarre thing which is extracted from the silver cloud case, turns the FCA’s argument on its head. On the FCA’s case what is required is one case of Covid-19 (diagnosed or undiagnosed) in the area to trigger cover for all losses. The silver cloud case however supports this “game of lotto” in Howard’s opinion 

14.21 All of the cases relied upon in the FCA case was ’but for’ loss of business interruption, but this is not a multiple wrong doer case, but that is not the true situation at all, each case involves one policyholder and once insurer, once you near that in mind, the answer is simple. Giving QBE as an example, the coverage dispute is between QBE and each of the parties to their relevant contracts. But the FCA’s argument lies in inextricably linked causes. 

14.15 The FCAs defence says that the government was acting for an overall national cause, Howard highlights meaning that this is part of an overall jigsaw. 

14.07 You can establish a ‘but for’ however you still need to establish a cause for the case says Howard, he adds that the ‘but for’ test was the question of proximate cause, and the thing that’s odd about the FCA’s submissions is that there is a line of authority. ”The law tampers with the ‘but for test’ at its peril,” he says.

14.00 And we are back Mark Howard said that we need to be careful not confuse things such as a landslip preventing a train from leaving, the landslip did not cause the business interruption, what needs to be considered is what would have happened during the time of the peril. In the current BI Covid case, what caused the business interruption was the government’s intervention. 

13.05: The court breaks up for lunch

12.48: QBE’s policy is valuable, but it is limited. If insureds wanted unlimited cover for business interruption arising from notifiable disease occurring anywhere then they would have bought it, Howard argues. He adds that QBE sells its policies through brokers, so they could’ve been asked for unlimited cover if that is what the insured was looking for

12.47: The mere presence of someone with Covid-19 in the relevant policy area will not necessarily cause loss to the insured - Howard on causation

12.36: The fact the disease is contagious is exactly why insurers seek to limit cover, Howard says, and that is why their is a geographical limit

12.34: FCA’s position ’is manifestly wrong’, he adds

12.30: QBE policy not intended to be triggered when disease is notifiable away from the premises, says Howard

12.02: Howard says that the QBE policy does not cover the effects of a notifiable disease ’anywhere and everywhere, provided that at least one person with the disease is present on the premises or within 25 miles’ and that the FCA saying it does is to ‘rewrite the clause’

11.35: Howard argues that a single case of Covid-19 is ‘not causative’ under a business interruption policy, describing the FCA’s case as ‘absurd’

11.30: Howard says the FCA’s case is back to front and is using ‘reverse engineering’ to seek the amount of cover it wants for policyholders, rather than the cover as defined by the policy wordings, and says that the FCA ‘lacks commercial common sense’ in its arguments

11.21: Howard says that the FCA is using ‘sleight of hand’ when constructing its case

11.20: The FCA cannot prove any causative effect of Covid-19, Howard says

11.05: And now its over to Mark Howard QC for QBE. He says the real issue is one of construction and how the QBE wordings respond to Covid-19 and the giverment action

10.46: Orr argues that losses arising from the lockdown restrictions would have arisen anyway because of wider social distancing measures

10.36: Orr says that prevention of access is different to hinderance or restrictions of use, and access is a physical action, and therefore physical access must be restricted for a claim to be made

10.24: Lord Justice Flaux says this is backed up by the more recent introduction of local lockdowns in places like Leicester and Oldham

10.22: Orr says that there is no evidence that the goverment had reliable information on the incidences of Covid-19 in different regions when it introduced lockdown restrictions, and instead acted on a national level to protect the NHS

10.21: Orr argues that at the beginning of the pandemic, the government was responding to international not national developments

10.14: Orr says the FCA is ‘trying to hammer a square peg into a round hole’ when trying to tie the national lockdown restrictions to local claims

10.12: Mr Justice Butcher says we don’t need to get into the issue of promisate cause, if police action is taken, then it is ‘following’. But Lord Justice Flaux says you need to have the danger in order to have cover, not just government or police action

10.10: Orr says that ’whatever the strength of the causal connection required, it is not settled on the agreed facts’

10.00: Welcome to Day 7 of the test case. First up David Orr QC representing Zurich

Missed yesterday’s proceedings? You can catch up on all the action from the fourth day of the hearing here

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financial loss, coronavirus