As mentioned in our recent webinar, during the COVID-19 pandemic, we have seen that insurers have been reluctant to pay out on Business Interruption (BI) insurance policies. The insurers usually argue that the policy wording does not cover events linked to the Covid-19 pandemic. This has led to continuing and widespread concern by the Financial Conduct Authority (FCA) of the lack of clarity and certainty for some businesses making BI claims and the basis on which insurers are making their decisions.
The FCA has therefore issued a test case in the High Court against insurers in order to get a determination from the court to resolve contractual uncertainty in BI insurance cover. This case will not include all possible disputes but will assist insurers and businesses in determining whether to pay out on relevant insurance policies.
The FCA has said that the majority of BI insurance is unlikely to cover the current COVID-19 pandemic but there does remain a number of policies where it is clear that the insurers would have an obligation to pay out.
The FCA has released guidance for insurers which states that they should review their decisions on claims and determine whether each case may be affected by, or will be dependant on, the final resolution of the test case. Insurers are then required to communicate this to their insured.
The test case will not affect insurance claims where the insured has accepted an offer by the insurers in full and final settlement of their claim. The test case also does not prevent parties from concluding a claim in full and final settlement but the insurers are required to inform their customers if they believe that their claim could be affected by the outcome of the test case.
A Case Management Conference took place on 16 June 2020 where the court made an Order that the case will be heard urgently and set out a timetable for the case to follow. The insurers are expected to file a defence to the test case and an 8-day court hearing will take place on 20-23 July and 27-30 July 2020. The hearing will be streamed live so that members of the public can watch it take place.
If your business has had a claim on a BI insurance policy refused by the insurers, then this case could assist you in having the claim re-considered. Insurers were required to inform policy holders where their claim may be affected by the test case by 22 June 2020 so if you believe that your claim may be affected, and you have not yet heard from your insurers, we would recommend that you contact them to discuss the implications of the test case.
A copy of all documents relating to the test case can be found on the FCA’s website here.
For all related enquiries, please contact a member of our commercial team on 01254 828 300 or email email@example.com