On 26 June, there was a further case management conference (CMC) in the FCA’s COVID-19 BI insurance test case. The CMC was before Lord Justice Flaux and Mr Justice Butcher. These two judges will sit together to hear the trial. The court dealt with a number of issues regarding the scope of the trial, the evidence and the timetable.
The eight insurers served their defences on 23 June. There is some commonality in the points put forward by the insurers, but the defences highlight the vast number of different issues that are raised. Twenty-one representative wordings are now being considered by the court and each raises different issues. Even where the same or very similar wording is involved, the insurers take different positions on the interpretation of the words in the context of different policies. Among the myriad matters that the court will have to consider, fundamental issues of causation and insured perils stand out.
At the CMC, all of the parties emphasised that it will be challenging to deal with all of the existing issues at the trial, currently listed to last eight days at the end of July. The approach of the court was that it would not add more representative wordings to consider or issues to decide. It was repeatedly stressed that case management matters are for the judges at the trial.
Two groups of policyholder litigants have been permitted to intervene in the action. The members of the Hiscox Action Group (HAG) have claims against Hiscox, an existing defendant in the action. The members of the Hospitality Insurance Group Action (HIGA) have claims against QBE, which is also among the existing defendants, and Aviva, which is not. There appear to be no plans to add Aviva as a party. The court stressed that the Financial Markets Test Case Scheme, under which this case is being heard, permits parties to intervene to ensure that all arguments are put forward. The court indicated that there was no doubt that the FCA would represent the interests of policyholders, but stressed that it was important that all the points of all significant groups of policyholders were heard. It was acknowledged that it was possible that HAG or HIGA may have additional arguments or at least that they may wish to put the arguments with a different emphasis or nuance. It was made clear that the involvement of the intervening parties will not result in any widening of the scope of the trial either by the addition of issues or more policy wordings.
There was an application by a single policyholder (a publican who is claiming under an RSA policy) for permission to intervene. This application was rejected on the ground that the relevant policy (being one that required property damage) was outside the scope of the wordings that are being tested by the FCA. The FCA’s action is limited to policy wordings that do not require property damage.
While most of the issues regarding evidence had been resolved by agreement before the CMC, a number of issues remained. RSA sought to add a further policy wording for consideration as part of the factual context (the “factual matrix”) in which the insurance contracts should be construed. The court refused the application, primarily on the basis that this was not evidence of the factual matrix and would be of no assistance. The FCA sought to adduce expert evidence on the question of whether certain diseases specified in a policy wording might lead to a widespread outbreak or would be localised in nature. The court ruled this evidence to be inadmissible.
The FCA complained that a number of the factual scenarios put forward by the insurers were too complex and said that there was a risk that the case was being turned into a determination of sample cases rather than of issues of principle that could be applied more widely. The court’s view was that it would find it helpful to decide the issues in the context of factual scenarios rather than in a vacuum, but that if they were too complex, they would not be helpful. The parties were encouraged to agree the scenarios.
At the previous CMC on 16 June, the most fiercely contested issue was the evidence on which the FCA seeks to rely to prove the prevalence of COVID-19. The exchanges at the CMC on 26 June made it clear that this important issue remains unresolved. The FCA seeks to rely on evidence (the Cambridge Analysis) to prove the spread and incidence of the virus across areas of the UK. Most of the policies that are in issue in the test case have a form of “vicinity” clause that requires the policyholder to prove the presence of the virus in a specified location or area in order to trigger the cover. The position of the FCA is that the Cambridge Analysis, being the study on which the UK government relies, should be sufficient for the policyholders to prove this element of their case. Hiscox, which leads the insurers’ response on this issue, takes the position that this analysis should be tested by expert evidence. At the CMC on 16 June, Butcher J ruled that no expert evidence on this issue could be adduced at the trial in July. The insurers have said that all of the potential experts in this field are engaged in dealing with the COVID-19 crisis and that the defendants have so far been unable to find one who is available.
The court confirmed that the issues for determination at the trial regarding prevalence are limited: firstly, to the type of proof (also referred to as the methodology) that could be sufficient to prove the prevalence of the virus; and, secondly, on the assumption that the Cambridge Analysis is the best evidence available, whether this would be sufficient as a matter of principle for the policyholders to satisfy the various vicinity clauses. The court said that if this matter is not agreed by the parties, it will have to be resolved with the assistance of expert evidence at a second trial, probably in September. The prospect of a second trial was clearly an unwelcome one for the FCA. It referred to the additional cost and the delay, and said that this is not something the FCA would enter into lightly. Counsel for the FCA speculated that the FCA may want to consider “other regulatory alternatives”, although no details were given. The FCA sought and was granted a seven-day moratorium on orders being made in relation to any second trial to give the FCA a chance to consider its position and to discuss the matter with insurers.
The court encouraged the parties to cooperate and to agree as much as possible. The defendants were warned that they should speak with one voice on issues of principle that are of general application. The arguments at the trial will depend heavily on the parties’ written submissions. These submissions will identify the issues of principle on which the insurers can put forward a single argument and the extent to which issues remain which are specific to one insurer or to a particular wording, with the positions of individual insurers requiring specific arguments. The court was told by the insurers that although there are some issues of principle which are common to the insurers, the variety of wordings will mean that the arguments on causation and insured peril are likely to be the subject of separate individual submissions.
The FCA is due to serve its reply on 3 July. The FCA and the intervenors will serve their written submissions on 10 July and the insurers will serve theirs on 14 July.