UK : THE FINANCIAL CONDUCT AUTHORITY (FCA) HAS PROVIDED AN IMPORTANT UPDATE ON PROGRESS ON ITS COURT ACTION ON BUSINESS INTERRUPTION (BI) INSURANCE POLICIES.

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

Set­tle­ments 

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. 

Appeals

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

Source : https://www.fca.org.uk/news/press-releases/update-fca-test-case-validity-business-interruption-claims