The FCA announced last month that it intends to seek legal clarity on business interruption insurance to assist businesses which are facing uncertainty about their claims. It aims to seek a court declaration on an “agreed and urgent basis” to get an independent view on disputed BI insurance policies. 

The pur­pose of this ini­tia­tive is to deter­mine whe­ther the non-pro­per­ty damage BI cover pro­vi­ded by seve­ral insu­rers should respond to Covid-19, and whe­ther it is legal­ly pos­sible to make a cau­sal link bet­ween Covid-19 and the losses suf­fe­red by cus­to­mers for­ced to close their businesses.

The regu­la­tor revea­led the eight insu­rers taking part in the High Court case, as well as the 17 poli­cy wor­dings that cap­ture the majo­ri­ty of the key issues that could be in dispute.

The FCA selec­ted a repre­sen­ta­tive sample of 17 poli­cy wor­dings which will be tes­ted and insu­rers that use those wor­dings, to give as much cla­ri­ty as pos­sible to both insu­rers and poli­cy­hol­ders alike. The FCA approa­ched 56 insu­rers and revie­wed over 500 rele­vant poli­cy wor­dings to come up with this sample. The regu­la­tor said that the test case would also pro­vide gui­dance for other BI poli­cies not inclu­ded in the sample, mea­ning that other insu­rers would be impac­ted regard­less of their inclusion.

The FCA expects to publish a list of all the rele­vant insu­rers and poli­cies that may have impac­ted wor­dings in ear­ly July. 

Chris­to­pher Woo­lard, Inter­im Chief Exe­cu­tive at the FCA said :

‘The court action we are taking is aimed at pro­vi­ding cla­ri­ty and cer­tain­ty for eve­ryone invol­ved in these BI dis­putes, poli­cy­hol­der and insu­rer alike. We feel it is also the qui­ckest route to this cla­ri­ty and by cove­ring mul­tiple poli­cies and insu­rers, it will also be of most use across the mar­ket. The iden­ti­fi­ca­tion of a repre­sen­ta­tive sample of poli­cies and the agree­ment of insu­rers who under­write them to par­ti­ci­pate in these pro­cee­dings is a major step for­ward in pro­gres­sing the mat­ter to court.’

The FCA also pro­poses ques­tions for deter­mi­na­tion by the court, focus­sing on what consti­tutes damage, cause of the denial of access to offices, proxi­mi­ty to pre­mises, etc.

The FCA also issued consul­ta­tion on draft gui­dance to set out its expec­ta­tions of all firms hand­ling BI claims and any rela­ted com­plaints bet­ween now and the court deci­sion, inclu­ding an expec­ta­tion that they iden­ti­fy those poli­cies where their deci­sion to deny claims may be affec­ted by the test case. These expec­ta­tions also apply toin­ter­me­dia­ries that handle claims on behalf of insurers.

Next steps : 

19 JuneFCA files claim form and particulars
11 JuneCase mana­ge­ment confe­rence, at which the court will be invi­ted to fix the time­table for the case
23 JuneInsu­rers file Defences
26 JuneFur­ther case mana­ge­ment conference
3 July FCA files Reply
First half JulySke­le­ton argu­ments and replies served
Second half July5 to 10 day court hearing


The FCA states that when any insu­rer set­tles a claim for a poli­cy that is part of the repre­sen­ta­tive sample of poli­cies refer­red to in the test case, the insu­rer must inform all other par­ties in wri­ting as soon as pos­sible. Howe­ver, a set­tle­ment will not auto­ma­ti­cal­ly mean that part of the test case has ceased. 


Insu­rers or the FCA will be able to appeal the deci­sion of the court, sub­ject to the usual pro­ce­du­ral rules. 

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