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Business Interruption Covid-19 Update

As many of you will already be aware from the extensive press coverage, the outbreak of the COVID-19 pandemic has brought into question the validity of some insurers' Business Interruption (BI) policy wordings. As a result, the Financial Conduct Authority (FCA) is seeking to bring court action in relation to ‘key relevant cases’, in an attempt to bring some independent legal clarity on specific policy clauses, with the aim to resolve doubt for businesses who are facing uncertainty on their claims. 

According to the regulator, the cases taken to court will be ‘carefully chosen’ as a representative sample of the most used policy wordings, where cover has been disputed. It said that it will come to an agreement with the insurers concerned, in order to get the fastest possible judgement on the cases placed in front of the court. The FCA said that it is intending to take this action in the public interest, to advance its consumer protection and market integrity objectives.

The statement continued: “It should be noted that this intended action by the FCA, which we hope to place before the courts in an agreed and urgent manner, is not intended to encompass all possible disputes, but resolve some key contractual uncertainties. This will assist both insurers and the insured. It will not determine how much is payable under individual policies, but will provide the basis for doing so. The action will not prevent individuals from pursuing issues through the courts, or taking eligible complaints to the Financial Ombudsman. If we obtain a declaratory judgment, the Ombudsman will be able to take it into account in considering relevant complaints.” 

The FCA is also writing to a small number of insurers to clarify whether they are declining or intend to decline BI claims and expect them to clarify their position by the 15th May 2020. Based on their answers, the FCA will consider which firms to ask to join the court process.

In addition to the FCA initiative, a group of (reportedly over 300) Hiscox policyholders have formed an action group and appointed law firm Mishcon de Reya as its lead counsel in its dispute against the insurer.

We will of course be monitoring the situation as it unfolds and keep you informed of any significant developments. In the meantime, should you have any queries in this regard, please do not hesitate to contact us.

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