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Supreme Court hands down its judgment in Covid-19 test case – Andrew Rigney KC and Caroline McColgan

The Supreme Court has today handed down Judgment in the landmark test case brought by the Financial Conduct Authority to establish whether a sample of business interruption policies which included extensions to cover that were not dependent on property damage would respond to losses sustained in the wake of the Covid-19 pandemic.

Andrew Rigney KC and Caroline McColgan were instructed by Mark Wing of Clyde & Co LLP on behalf of Zurich Insurance, and acted for Zurich at all stages of the case. Zurich was one of only two insurers to establish in the Commercial Court that its policy wordings do not respond to Covid-19. It was a respondent to the FCA’s appeal in the Supreme Court, but the outcome of the appeal does not alter the result in Zurich’s case.

This article reviews the Judgment generally, and aims to provide a (non-exhaustive) insight into the most significant findings that emerge from it.

Background and Issues

The FCA pursued a leapfrog appeal against the Judgment of the Commercial Court (Flaux LJ and Butcher J), on four principal grounds. These were:

  • Three issues of construction, namely:
  • What was the nature of cover provided by “disease” clauses and, where those clauses included a “radius requirement”, whether cover would be available for the effects of an occurrence of a disease outside the radius as well as within it?
  • Do policies which provide cover for actions taken by a public authorities respond to actions which do not have the force of law?
  • Do policies which depend on there being an “inability to use” premises or a “prevention of access” to premises (or similar) require total inability to use and/or prevention of access, or is a partial inability to use or prevention of access sufficient for cover to arise?
  • An issue of quantification: where the insured peril is a composite peril, made up of multiple elements, can the effect of one or more of those elements in isolation be taken into account in reducing the indemnity due to the insured once the policy is triggered? This involved the first consideration by the Supreme Court of the effect of “trends” clauses.

Six of the eight Insurers who were defendants to the FCA’s claim appealed the findings made at first instance. These appeals included various appeals against the Commercial Court’s construction of the policies that were the subject of the Test Case, and an issue of causation of general importance. This arose from the fact that in the case of COVID-19, policyholder’s losses are, in the majority of cases, likely to have been caused by a variety of factors, ranging from the disease itself, public fears which encouraged customers to remain at home and mandatory restrictions imposed on both businesses and customers which prevented any who were willing to access such businesses from doing so. The Court was required to consider what causal connection had to be shown between the particular insured peril and the loss which the policyholder sought to recover. This involved a complex analysis of the interplay between “but for” and “proximate” causation, and the application and utility of these doctrines in cases of multiple/concurrent causes of loss. As part of that, the Court had to consider the appropriate counterfactual against which to measure the insured’s loss where any cover could be established.

The Judgment

The Judgement is in two parts: the first part addresses issues of policy construction which are more or less specific to the policies that were the subject to the Test Case, although they may be expected to provide a guide to the interpretation of others within the Market which adopt similar language. The second part of the Judgment addresses causation and the effect of the trends clauses.

The key findings, in relation to those policies which were the subject of the Test Case, are:

Policy Construction

  • Those disease clauses which respond to a case/cases of COVID-19 occurring within a particular radius provide cover for only the relevant effects of cases of COVID-19 that occur at or within a specified radius of the insured premises. They do not cover effects of cases of COVID-19 that occur outside that geographical area;
  • In the case of “prevention of access” and hybrid wordings, it is possible that mandatory instructions issued by the government or another relevant public body which do not have the force of law could trigger cover in some limited circumstances. Whether the circumstances of any particular case will fall within the same category will have to be the subject of further argument;
  • Policy wordings which require there to have been an “inability to use”, or “prevention of access” to, the premises might respond if the policyholder is unable to use or access the premises for a discrete part of its business activities, or if it is unable to use or access a discrete part of its premises for its business activities. While a complete inability of use or prevention of access is required, the Court found that that would arise in either of those situations because, in the first, there is a complete inability to carry on a discrete business activity; in the second, there is a complete inability to use a discrete part of the business premises;
  • It is possible, but the Court considered it would be rare, for restrictions imposed on customers, as opposed to the premises, to be sufficient to trigger cover under this type of wording. Accordingly, policyholders are unlikely to be able to obtain an indemnity for business interruption caused by the Government’s “stay at home” advice, or Regulation 6 of the 23 March Regulations, which prohibited persons from leaving their homes without reasonable excuse but did not, in and of itself, affect the ability of businesses to be used or accessed. It is therefore unlikely that a business in the FCA’s Category 3 or 5, which were businesses which were permitted to remain open, would be able to show a qualifying inability to use or prevention of access.


  • In the insurance context, the established approach in assessing the cause of any loss is to identify which of a range of causes might best be described as its “proximate” or “efficient” cause;
  • It is well-established (the Court referred to authorities such as JJ Lloyd Instruments v Northern Insurance Co Ltd (“The Miss Jay Jay”) [1985] 1 Lloyd’s Rep 264 and Wayne Tank v Employers’ Liability Assurance Corpn [1974] QB 57), that there may be two proximate causes which act in combination to cause the loss. Recovery under a policy which insures against one of those causes is not precluded unless the policy expressly excludes the other cause;
  • The Court held that there is no reason why the same principle could not be extended, so that it would apply to losses attributable multiple concurrent causes, such as those arising from COVID-19. In assessing the cause of the restrictions on businesses which were imposed by the UK government in order to control the pandemic, the Court found that each individual case of COVID-19 ought to be treated as an equal cause of the imposition of the national measures;
  • Insurers had resisted this on the basis that it was inconsistent with the “but for” test. The Court agreed that in the vast majority of insurance cases, indeed in the vast majority of cases in any field of law or ordinary life, if event Y would still have occurred anyway, irrespective of the occurrence of a prior event X, then X cannot be said to have caused Y. However, it appeared critical of the “but for” test as being an unsatisfactory measure of causation. Too often, it is overly “inclusionary”, resulting in an array of potential causes being identified, many of which would have played only a minor or peripheral role in the loss. It could also be overly “exclusionary”, notably in cases of concurrent causes, where its strict application would mean that neither of two concurrent causes would be said to be the cause of the loss. For this reason, it is probably best treated as a “minimum” or “threshold” test of causation;
  • There is nothing in principle or in the concept of causation which precludes an insured peril that in combination with many other similar uninsured events brings about a loss with a sufficient degree of inevitability from being regarded as a cause of the loss, even if the occurrence of the insured peril is neither necessary nor sufficient to bring about the loss by itself. Whether that causal connection is sufficient to trigger the insurer’s obligation to indemnify the policyholder depends on what has been agreed between them. This is likely to be a value judgment to be made in each case;
  • In the case of the disease clauses that were the subject of the test case, the Court accepted the FCA’s central argument in relation to the radius provisions that the parties could not reasonably be supposed to have intended that cases of disease outside the radius could be set up as a countervailing cause to displace the causal impact of the disease inside the radius;
  • Accordingly, the Court rejected the insurers’ contention that the occurrence of one or more cases of COVID-19 within the specified radius could not be a cause of business interruption loss if the loss would have been suffered but for those cases, because the same interruption of the business would have occurred anyway as a result of other cases of COVID-19 elsewhere in the country. In other words, the “but for” test did not, or did not necessarily, have to be satisfied;
  • The Insurers’ alternative argument (referred to in the judgment as “the weighing approach”) was also rejected. This had invited the Court to find that even if the “but for” test did not have to be satisfied, it could not be said that all of those cases of COVID-19 within the radius of the insured premises and the scope of the policy were such as to bring about the nationally-imposed restrictions, which had been a response to the much larger situation across the UK and the world. The Court expressed concerns about the practical and logical consequences of this, and found that since the loss was essentially “indivisible” so too must be the question of whether it was caused by an insured peril;
  • On this basis, the Court found that, on the proper interpretation of the disease clauses, in order to show that loss from interruption of the insured business was proximately caused by one or more occurrences of illness resulting from COVID-19, it would be sufficient to prove that the interruption was a result of Government action taken in response to cases of disease which included at least one case of COVID-19 within the geographical area covered by the clause;
  • For the purposes of the “prevention of access” and hybrid wordings, the counterfactual was more difficult because the peril was a “composite” one made up of various elements. However, it was not open to insurers to refuse indemnity on the basis that one or more features of that composite peril, with the same originating cause but falling short of the whole, amounted to a competing cause of the loss. Such features would be expected to occur concurrently with the insured peril; they were not a “separate and distinct risk”;
  • This approach is not to be diluted by the application of the trends clauses. The Court confirmed that the trends clauses were part of the quantification machinery within the Policies, and so should be interpreted consistently with the insuring clauses, rather than in such a way as to remove cover that would otherwise be available under the insuring clauses.
  • The decision in Orient Express Hotels Limited v Assicurazioni Generali Spa (UK) (t/a Generali Global Risk) [2010] EWHC 1186 (Comm) has been overruled.


The outcome of this appeal will be of immediate interest to hundreds of thousands of policyholders whose businesses have been adversely affected by the harsh economic conditions arising from COVID-19. In the longer term, the Supreme Court’s treatment of fundamental principles, in particular in relation to causation, can be expected to have implications that go far beyond the insurance context.


Andrew Rigney KC and Caroline McColgan will be giving a webinar to discuss the implications of the test case on Thursday 28 January 2021. If you would like to book a place, please email for more information.

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