Since 1st May the FCA has approached 56 insurers and reviewed over 500 relevant policies from 40 insurers.
#CLARIFY COVID 19 UPDATE#
Meanwhile, the FCA has issued an update with regard to property damage and BI wordings and how they should be interpreted in light of COVID-19 related losses. Whilst this wait for clarity is sure to be unappreciated by those who have had their claims denied, if the ruling is sufficiently robust it should prove to be a much quicker and cheaper route to legal determination than the alternatives available. While the FCA aims to get the case heard by as soon as July, the public release of a judgment will take longer considering the ramifications for policyholders. Furthermore, unless insurers consider their denials to be built on sand it is anticipated that most will maintain denials until they have a better indication as to how the court will apply the law to their particular policy wordings. For now, litigators are unlikely to issue legal proceedings in the absence of the judgment so as to ensure that their clients are not liable for the insurer’s legal costs should the High Court take a dim view of the policyholder arguments presented by the FCA and their nominated lawyers, Herbert Smith Freehills. To achieve their aim, it is clear that the judgement will have to be very detailed taking into account a myriad of policy wordings and claim circumstances. In seeking legally binding declaratory relief, the FCA intends for the public judgment to act as an indicator as to which, if any, policy wordings should respond to COVID-19 related claims and how the law applies to these unprecedented circumstances. In order to address the uncertainty and avoid widespread and costly litigation the regulator has pulled together a sample of representative policy wordings and associated disputes for consideration by the High Court. “There is continuing and widespread concern about the lack of a positive response of some of those BI insurance policies, and the basis on which some insurers are making decisions in relation to claims,” the FCA explained (opens a new window). Policyholders have formed several group actions in recent months against a few carriers over the non-payment of BI claims due to ambiguous wordings.
Many companies were hoping to recoup at least some of the financial fallout from their BI insurance provider but after claims were denied some are threatening legal action. This has produced an unprecedented level of loss and distress for businesses, in particular for small and medium-sized enterprises (SMEs). The government lockdown introduced in late March designed to limit the spread of SARS-CoV-2 has forced many companies in the UK to suspend operations. UK’s watchdog Financial Conduct Authority (FCA) is seeking a court declaration to resolve contractual uncertainty in business interruption (BI) insurance policy disputes related to the Covid-19 pandemic.
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