Covid-19 and Business Interruption Insurance: The next steps

May 18, 2020

By Jonathan Lowe

In recent articles I have addressed the difficulties posed by claims on business interruption insurance in the current crisis (see here and here). As discussed, the FCA intends to launch declaratory proceedings with the co-operation of any relevant insurer in order to seek clarification and certainty for as many policyholders as possible.

On 1st May the FCA asked insurers for information on the business interruption cover that they provide and their attitudes to the application of that cover in order to consider which policies it will seek declaratory relief in relation to. The insurers were to respond by 15th May and on that date the FCA issued a further statement in which it now seeks information from policyholders themselves in order to be able to best formulate any proceedings to seek to properly direct the proceedings to answer the questions that are facing policyholders.

However, time is pressing because policyholders are asked to give their views by 20th May. It would be sensible for any policyholder who wishes their views to be taken into consideration to engage with the FCA using the dedicated link on the website by that date.

I can do no better by way of explanation than set out what is said in the FCA’s very clear statement, the relevant parts of which are as follows

“We want your views

The coronavirus pandemic will have affected policyholders in many different ways. The issues relevant to the intended proceedings will be wide-ranging and complex. We recognise we will better achieve our consumer protection and market integrity objectives if the proceedings cover as broad a cross section of policies and issues as is compatible with an expedited court process. We are reviewing extensive material provided by insurers with the aim of delivering on that objective.

So, we are inviting policyholders of BI insurance who are in dispute with their insurers over the terms of their policies to engage with us, should you wish us to take these arguments into account as part of the test case. In particular, we ask that you send us:

  • your (or your representative’s) arguments as to why you consider cover should be available in cases where you consider your insurers have not responded appropriately to a claim;
  • the wording of the policy that has not responded; and
  • brief relevant facts of the case.

We need policyholders’ arguments now as we intend to seek the court’s view on relevant policies as soon as possible, and we will consider all arguments and information you raise to us by Wednesday 20 May 2020. Where you are a member of an action group pursuing action against an insurer or of a relevant trade body, please could you also identify this clearly in your correspondence.

Please email: biinsurancetestcase@fca.org.uk

We will contact you if we have any queries in relation to the information submitted and will consider all arguments raised, but we will not be able to respond individually to all emails sent to this email address.

We will provide email updates to policyholders who sign up for these via the link below.

High Court test case and policyholder engagement

The High Court test case is not intended to encompass all possible disputes, but to resolve some key contractual uncertainties to provide clarity for policyholders and insurers. It will not determine how much is payable under individual policies, but will provide the basis for doing so.

We have now developed a Policyholder Engagement Statement for policyholders and insurance intermediaries which sets out our approach to the High Court test case for BI insurance policies, with the key points as follows:

  • The FCA will put forward policyholders’ arguments to their best advantage where claims have been rejected and the usual channels of claims settlements have reached an impasse.
  • The intended action will not prevent individuals from pursuing issues through negotiated settlement, arbitration, court proceedings as a private party, or taking eligible complaints to the Financial Ombudsman Service.
  • We wish to ensure that policyholders and insurance intermediaries are properly engaged throughout the test case process.
  • We are inviting policyholders and insurance intermediaries who are aware of unresolved disputes with insurers over the terms of BI policies to email arguments they wish us to consider as part of the test case (with the associated policy and brief factual circumstances) to biinsurancetestcase@fca.org.uk by Wednesday 20 May.
  • We will treat this information as confidential and covered by the FCA’s litigation privilege.
  • We will use the arguments, policies and fact patterns put forward by policyholders to inform the sample of policy wordings and fact patterns to be used in the court proceedings.
  • We expect to make public all the ‘pleadings’ in the test case, and will update this webpage regularly and be available for discussion with action groups and policyholders and their legal representatives.
  • The result of the test case will be legally binding on the insurers that are parties to the test case in respect of the representative sample considered. It will also provide persuasive guidance for the interpretation of similar policy wordings and claims, that will be able to be taken into account in other court cases, by the Financial Ombudsman Service and by the FCA in looking at whether insurers are handling claims fairly.”

Before transferring to the Bar in 2008 Jonathan Lowe was Head of Commercial Insurance at Keoghs. He has a broad commercial practice but in particular has over 25 years’ experience in insurance law.

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