The FCA has just provided a further update on the progress of its High Court test case concerning business interruption (“BI”) insurance.

In so doing, the FCA has published its reply to the insurers’ defences (served on 24 June), . The FCA notes that it received more than 90 detailed submissions from policyholders and other stakeholders on the insurers’ defences, which the regulator previously called for and then took into account when preparing the reply.

The reply submits, amongst other things, that the insurers’ defence arguments rely on definitions beyond what a reasonable purchaser of insurance would understand. The FCA argue that insurers have adopted unduly restrictive meanings of certain words (e.g. “prevention” and “occurrence”) and approaches to proof as to the presence of COVID-19 in an area. The FCA also argue that insurers are relying on causal tests prescribing “unrealistic, impractical counterfactuals depriving the [insurance] cover clause of much of its apparent and intended scope – none of which reflect what the reasonable person in the position of the parties would understand”

The reply goes on to say that the insurers’ defences fail to take account of the true nature of the BI insurance, including the fact that the insureds are generally SMEs who are mainly unsophisticated purchasers of insurance. The FCA notes the low limits of indemnity for the BI cover and argues that the polices are meant to be readily comprehensible to insureds who generally purchased the  polices “off the shelf” in a standard form written by insurers (whether through brokers or directly).

Trial is now due to take place on 20 July for eight days so please watch this space for more developments.