Legal experts state the choice of Supreme Court judges is ‘relevant’ and ‘interesting’

Among the bench of Supreme Court judges chosen to hear the appeal of the FCA’s test case next week are legal professionals that ruled in the historic Orient Express Hotels v Assicurazioni Generali case, which was cited by the majority of insurers in their defences at the High Court – legal experts said this decision is “relevant” and “interesting”.

In October, the High Court awarded permission for the FCA’s test case – which sought to clarify the interpretation of business interruption (BI) policy wordings in relation to Covid-19-related claims – to ‘leapfrog’ the Court of Appeal to instead have its appeal process heard in the UK’s highest court, the Supreme Court.

Earlier this month, it was confirmed that the Supreme Court hearing would commence on 16 November and would run for four days until 19 November.

This follows the High Court’s September judgment, which ruled in favour of the FCA and policyholders for the majority of the key issues being considered, for example coverage triggers for disease and hybrid causes, certain denial of access and public authority clauses, as well as causation and trends clauses approaches.

According to TMD Insurance Group, the Supreme Court judges hearing the appeal are Lord Reed, Lord Hodge, Lord Kitchin, Lord Hamblen and Lord Leggatt – for Sarah Prager, barrister at One Chancery Lane, these last two names are important as they were involved in the famed Orient Express case.

Speaking at a virtual Forum of Insurance Lawyers (FOIL) roundtable on 9 November, Prager said: “The actual personnel in the Supreme Court who are going to be hearing this appeal hearing are not only a well-regarded court, not only a very experienced court, but also a court who have seen these issues before in these specific circumstances. Quiet interesting that.”

Prager mulled over how the Supreme Court will approach the High Court’s dismissal of its previous Orient Express ruling – she added that Lord Justice Flaux and Mr Justice Butcher within the High Court judgment were “really rude” and “sniffy” about the prior ruling; they believed it to be wrong.

Now, the Supreme Court judges that made that initial decision will be reviewing Flaux and Butcher’s take on how BI wordings should be applied in these specific types of circumstances.

However fellow One Chancery Lane barrister Richard Collier said that the presiding judges will most likely not let ego effect their decision-making.

He said: “They could find a roundabout way of achieving the same result. What they could do is endorse the idea of a composite peril and then distinguish it on the same basis.

“As a matter of plain common sense, the fact that the judges in the Supreme Court are the same ones that decided the case that’s been distinguished is relevant.”

Speed is of the essence

Prager added that the speed of the court action in this instance is commendable, in particular because of its importance for “public policy”.

She explained: “Businesses are going under while they wait to be paid out on their insurance policy and the FCA is very anxious to get some framework in place to allow both businesses and insurers to plan; to enable them to reserve in the case of insurers, to enable them to claim in the case of businesses and try and save as many businesses as possible whilst also not having a blanket payout for insurers, so save as many insurers as possible.”

However, a quick conclusion is also required, Prager continued, as “the longer this goes on for, and in particular the longer the uncertainty goes on for, the worse it gets for everybody” as the government’s changing mitigating measures will trigger a wider variety of policy wordings that will need to be considered.

She said: “As time goes on and situation develops, it involves more and more people because more and more clauses come into play. So, we’ve had the first lockdown, we’ve come out of it. We’re in the second lockdown, but we’re also now in a tiering system as well, so there will be some policies which are now coming into play as a result of the tiering system that might not have been triggered by other measures taken by the government.”

What happened in the Orient Express case?

In the Orient Express case, the hotel submitted a claim after its premises was damaged during Hurricane Katrina in 2005, however the insurer involved rejected this, stating that regardless of whether the hotel was damaged or not, it would still have been unable to trade because of the large scale evacuation of the area and the state-wide decimation.

The court agreed with the insurer, but in the end the parties made an out-of-court settlement.

This ‘but for’ methodology was cited by a number of insurers during the FCA’s test case, yet the presiding High Court judges disagreed with their colleagues’ initial judgment.