Business Interruption and Covid-19 – Latest FCA Update

June 3, 2020

By Jonathan Lowe

In order to give an update following up on my previous 3 articles (see here, here and here), on 1st June the FCA published a further announcement on the progress of its declaratory action in its efforts to bring clarity and certainty to claims under business interruption cover arising from the pandemic.

You can view the FCA announcement here. It contains a great deal of information including further links to lists of the policy wordings that will be considered and the insurers that have agreed to participate.

17 policy wordings have been identified and a number of insurers have agreed to participate in the proceedings which are due to be issued on 9th June with a view to a 5-10 day hearing being listed to be heard in the second ½ of July.

The policy wordings identified are said to capture the majority of the key issues that could be in dispute.

That said, the announcement does once again confirm that “Policyholders should not assume that simple inclusion of their policy wording in this case will mean their policies are responsive. We are seeking a judgment that will help policyholders and insurers have a much clearer view of which business interruption policies respond to the pandemic, and those that don’t. Therefore, the court may well decide a number of these policies respond to the pandemic and others do not.”

Furthermore, whereas this seemingly well-organized and comprehensive action will go a long way to resolving areas of dispute and hopefully lead to a large number of successful claims which may result in businesses being saved, it must be remembered that each claim is considered on its own facts and care will always need to be taken to be sure that the particular facts are applied properly in the context of any declaratory findings that are made about any particular policy wording.

Of particular importance to policyholders is that before proceedings are issued there will be a further brief period of consultation in which other insurers are asked to consider whether their own policy wordings will be impacted.

As part of this process clear and comprehensive guidance has also been given by the FCA to insurers whose policy wordings may be impacted by the test case so that, in particular, they will be obliged to reassess any claims, that have already been processed and rejected, in light of the outcome of the test case. The guidance can be access through the link provided.

Therefore, the test case will have implications for old as well as potential claims. Furthermore, insurers must act fairly in the interim and communicate clearly with policyholders whose policies and claims may be impacted by the test case.  It will be important for advisers to keep this guidance in mind in considering whether or not an insurer has acted within it and the rules identified in FCA Principles for Businesses (PRIN), the Insurance Conduct of Business sourcebook (ICOBS), and the Dispute Resolution: Complaints sourcebook (DISP).