The FCA Business Interruption Insurance Action – What does it mean?

 The FCA (Financial Conduct Authority) has launched a claim against 8 insurers.  Here’s a basic outline of what is going on.

The court is being asked to consider various sample wordings from the insurance policies of 8 insurers to decide what they may or may not mean. Some of the policies being examined do contain similar wording to those of our clients we have considered, although the policies are not generally ones we have encountered amongst the licensed trade.

There are essentially 3 issues which will be of relevance to you:

• What does the policy holder have to do to establish that Covid-19 was present within a certain distance from their premises?  Can they, for example, rely upon an assumption that it was present as this is a pandemic and it is for the insurers to provide otherwise?

• Do certain arguments advanced by insurers work, such as a closure was not ordered by a particular body (e.g. police of local authority) or because of a specific instance of the virus, and therefore it is not covered by the policy?

• In assessing whether the policy holder has suffered loss should the fact that the premises would not have produced any income because of the pandemic even if they had not been ordered to close be relevant?

However, the following 4 issues, which may be relevant to many of you, will not be considered by the court because the wording has not been included:

• What is required to prove the presence of the virus on the premises?

• Can the presence of the virus on the premises be assumed in a pandemic?

• Are lists of diseases always exhaustive or can they be merely indicative of what is covered?

• Are loss of stock claims recoverable?

What is the upshot of the FCA Action & what should I do if I have not submitted a claim yet or quantified it?

• Positive findings on any of the 3 issues before the court will help clients and we shall continue to follow the proceedings closely.  We expect however that for most there will be further work to do to obtain proper recovery and the insurers are bound to push back on issues upon which the court has not expressed a view.We also expect that in the event that the judgments go against the insurers, they will appeal.

• There is a high expectation by the FCA that the insurance sector as a whole will follow the guidance of these judgments, accept the result and pay out if required. We hope the FCA is right, however, that is by no means guaranteed.

• If you have not already made a claim for business interruption loss and/or loss of stock, you should do so now. If the judgments go against insurers and you have not yet made a claim, there is a strong likelihood they will rely on the requirements of your policies to submit claims promptly, and deny your claim on that basis.

• If you have made a claim, you should quantify it now if possible, if you have not already done so, so that you can present the insurer with full particulars and avoid any further delays in recovering your insured loss.

More help from Cerulean HERE