Co-authored by Mahmuda Kamalee

Over six years have passed since the first lockdown in March 2020, and insurance coverage disputes in relation to business interruption and furlough payments continue to raise novel issues for determination by the courts.

The UK Supreme Court recently heard the cases of Bath Racecourse Company Limited and others v Liberty Mutual Insurance Europe SE and others UKSC/2025/0068 and Gatwick Investment Limited and others v Liberty Mutual Insurance Europe SE UKSC/2025/0067, and judgment is expected on 22 April 2026. 

Ahead of the judgment being handed down on 22 April 2026, in this article, we reflect on previous decisions, and the issues that remain to be determined by the UK’s most senior court.

Financial Conduct Authority v Arch Insurance (UK) Ltd and others [2021] – The FCA Test Case

The COVID-19 pandemic and the UK Government's consequential public health measures resulted in businesses suffering from substantial financial losses across the country. Thousands of business interruption insurance claims were submitted but insurers declined payouts on the basis that the policies did not respond to the effects of the pandemic.

The FCA clarified the position through considering eight insurers and 21 lead policy wordings. Judgment was handed down by the High Court in September 2020 in favour of the FCA before proceeding to the Supreme Court.

The Supreme Court's landmark judgment of 15 January 2021 resolved fundamental questions concerning the proper construction of business interruption policies and applicable principles of causation including disease clauses, prevention of access and hybrid clauses, causation, trends clauses, pre‑trigger losses, and the effect of prior authority.

The Supreme Court held that:

1. Each individual case of COVID-19 was a separate and equally effective cause of business interruption losses.
2. With respect to the prevention of access and hybrid clauses, "restrictions imposed" by a public authority need not always be legally mandated. Mandatory Government instructions issued in emergency circumstances sufficed.
3. Furthermore, the inability to use even a discrete part of the premises was sufficient.
4. On trends clauses, the Court held that such clauses must be construed so as to align with, rather than limit, the coverage granted by insuring clauses, and should not enable insurers to reduce payouts by reference to the pandemic itself. 

The decision was groundbreaking in establishing that a catastrophe like COVID-19 could trigger both insured and uninsured causes of loss and that the “but for” test was no longer the decisive test where multiple causes contributed to the loss claimed.

Bath Racecourse Company Limited and others v Liberty Mutual Insurance Europe SE and others [2025] 

Following the FCA test case, the courts were asked to consider claims by racecourses, hotels and leisure venues under “prevention of access” clauses for losses caused by pandemic restrictions.

Two key issues arose:

• First, whether under group insurance policies each insured is entitled to its own separate limit of indemnity or must share a single aggregate limit; and
• Second, whether government furlough payments under the Coronavirus Job Retention Scheme (CJRS) should be deducted from insurers’ payouts under savings clauses. 

At first instance and in the Court of Appeal, the courts held that composite policies are properly construed as a series of separate contracts, so each insured entity is entitled to its own limit of indemnity.

On furlough, the Court of Appeal agreed with the first instance decision that CJRS payments must be deducted on the basis that they reduce the insured loss and fall within the policies’ savings clauses, rejecting the policyholders’ arguments that they were collateral benefits in the form of state support. The insurers contended that furlough payments directly reduced wage costs and were introduced specifically to mitigate pandemic losses such that deductions were required under trends clauses. 

While the courts dismissed the appeals for both the policyholders and the insurers, permission to appeal to the Supreme Court was granted on the issue of furlough payments. The Supreme Court’s decision will determine whether CJRS payments are deductible and, in turn, whether state support provided to businesses can indirectly benefit insurers.

Gatwick Investment Limited and others v Liberty Mutual Insurance Europe [2024] 

Like Bath Racecourse, Gatwick Investment Ltd concerned business interruption claims arising from COVID-19 brought by hotel operators amongst other businesses. The dispute focused on prevention and denial of access clauses, in particular whether nationwide restrictions fell within the scope of clauses arguably designed for localised incidents, how key terms such as “statutory authority” “incident,” and radius requirements within policy wording should be interpreted, how policy limits operate, and whether CJRS payments must be deducted from recoverable losses. 

At first instance, the court favoured policyholders on coverage holding that government action could trigger prevention of access clauses and that COVID-19 could constitute a relevant “incident” in principle.

Mr Justice Jacobs found that the term “Statutory Authority” encompassed the UK Government exercising its statutory powers, rejecting the narrower construction. COVID-19 cases within a one-mile radius constituted a “danger or disturbance” and the presence of COVID-19 within the relevant radius, combined with cases nationally, was sufficient to constitute a separate concurrent cause of the regulations restricting access.

Consistent with the Court of Appeal in Bath Racecourse, the court held that each insured under a composite policy was entitled to claim up to the relevant policy limit individually. 

On furlough, following Mr Justice Butcher in Stonegate, the court held that CJRS payments reduced wage costs within the meaning of the savings clauses and that the scheme was a mitigating measure introduced as a consequence of the insured peril such that credit must be given.

The policyholder appealed to the Supreme Court on this finding, which was heard jointly with Bath Racecourse. 

Stonegate Pub Co Ltd v MS Amlin Corporate Member Ltd [2022] 

In Stonegate, the Commercial Court was asked to consider a wide range of issues, including the triggers of cover, aggregation, the proximate cause of the losses as well as furlough payments. The decision in Stonegate was handed down at the same time as related first instance decisions in Various Eateries and Greggs. All concerned losses suffered by businesses in the hospitality sector. (Part of the Various Eateries decision was appealed - see further below.)

The main findings were as follows:

• Trigger for cover: the applicable trigger depended on the meaning of the insuring clause.
• Aggregation (whether a single occurrence or as many occurrences as there were Covid-19 cases): “occurrence” is equivalent to an “event”; something which happens at a particular time, at a particular place and in a particular way. This is assessed from the view of an informed observer in the position of the policyholder. The assessment should be at the earliest point at which a reasonable observer would seek to decide whether there was one occurrence – for Covid-19 that was shortly after losses started to be incurred. It was further held that the reasonable observer can only have knowledge that would have reasonably been available to it at the time (i.e. not with the benefit of hindsight).
• Causation: this was a fact-sensitive analysis of the 36-month indemnity period within the relevant policy. The Court rejected all of the policyholder’s arguments on the period during which losses could be said to be proximately caused by the insured events. On the facts, the losses from insured events as a result of the initial shutdowns, ended when premises were permitted to re-open.
• Furlough: the policy wording provided for the deduction of “[a]ny costs normally payable out of Turnover (except depreciation) as may cease or be reduced during the Indemnity Period as a consequence of the Covered Event". In line with the construction of the language, the court held it was necessary for the policyholder to give credit for CJRS payments.

Issues of furlough were initially to be appealed, but the Stonegate claim settled on confidential terms.  

Various Eateries v Allianz Insurance Plc [2024] 

The Court of Appeal was asked to consider aggregation wording in the Various Eateries policy. Analysis of aggregation is always a fact-specific analysis and the outcome depends on the particular policy wording at issue.  

The Court of Appeal agreed with the first instance decision that the first human incidence of Covid-19 in Wuhan was a “single occurrence”. The Court of Appeal also accepted that the first introduction of Covid-19 to the UK was a “single occurrence”. The losses suffered by Various Eateries was also “in connection with” the first infection, and the first UK infection. The main issue for the Court of Appeal was remoteness: whether the particular occurrence amounted to an aggregating occurrence. This is a legal test arising independently to, but consistently with, the applicable policy language.  The search is for the significant or relevant event, or for one which provides a meaningful explanation for the loss; these are all synonyms which express the same concept. The test of the remoteness is not to be equated with the proximate or effective cause. The Court of Appeal considered that the emergence of Covid-19 in Wuhan was too remote from the losses to be an aggregating occurrence, and consequently declined to aggregate all of Various Eateries' losses.

London International Exhibition Centre Plc v Allianz Insurance Plc & Ors [2024]

The wording at issue in London International Exhibition Centre was the “at the premise” wording similar to that considered in the FCA Test Case. 

It was argued on behalf of the insurers that the purpose of the "at the premises" wording was to provide cover for losses following outbreaks at the specific policyholder’s premises, and therefore the test laid out in the FCA Test Case would not apply.

The Court of Appeal agreed with the first instance decision; concluding that “at the premises” wording aligned with radius clauses so that even a single occurrence of COVID-19 at the insured premises satisfied the causation requirement. Further, the Court of Appeal rejected the insurers’ narrow interpretation of causation and held that the proper causation test should apply: occurrences of COVID-19 at the policyholder’s premises together with all the cases across the country were the cause of the closure of the policyholder’s premises. 

Significance of the awaited Supreme Court decision 

March 2026 marked the six-year anniversary of the imposition of Government restrictions. Six years is also likely to be the expiry of the limitation period for claims under English-law policies (subject to any standstill or tolling agreements in place). 

The forthcoming Supreme Court decision will carry significant, market-wide consequences for the insurance industry, and is expected to provide certainty to policyholders still waiting for final coverage decisions.

The central issue in Bath Racecourse and Gatwick Investment is whether furlough payments must be deducted from insured losses. If the lower courts’ decision is upheld, the Supreme Court will reinforce a strict application of the indemnity principle, confirming that government support constitutes a saving notwithstanding that it was not paid by the insurers themselves.

Conversely, if the Supreme Court rejects deduction, the collateral benefits doctrine will be strengthened such that external support, including state support, would not reduce insurers’ liability. These pending decisions will set leading precedent on how state support – whether in the form of subsidies, grants or other payments – is treated across insurance claims going forward.

For both insurers and policyholders, the outcome will shape how future catastrophe-related business interruption claims are reserved, negotiated and settled, particularly where government intervention forms part of the loss landscape.