Numerous notifications or claims are being made in Business Interruption (BI) insurance policies which are highly likely to be, if they have not already been, disputed.
In the light of this the FCA on 1 May 2020 announced that it was taking a test case to court seeking declarations regarding BI claims for COVID-19 and standard policy wordings.
On 1 June 2020 the FCA published an update and issued draft guidance as to its expectations of insurers and intermediaries (brokers) when handling BI claims pending the test case. A further update on 10 June 2020 confirmed that the proceedings have been issued.
A directions hearing is expected to take place on 16 June 2020. The FCA is seeking an expedited hearing. The FCA has said it anticipates seeking further comments from stakeholders after 23 June 2020 when the insurer parties to the test case are due to file their Defences.
Where a BI claim has been declined or adjusted by the insurer the insured business may well look to their broker for redress. Brokers are required by the FCA to have professional indemnity insurance and so may be an attractive target, although should not be seen as effectively a insurer of last resort.
Such claims will involve complex issues both for the Claimant business and the defendant broker such as:
The guidance will apply where a claim or complaint relating to COVID-19 has been made and the insurer has either rejected the claim, or made a reduction or adjustment to the claim, or has not yet made a decision, or where the insurer has publicly stated that its standard BI policy will not respond to a COVID-19 claim.
The FCA expects the insurer to undertake a review of the test case, appoint a senior manager to oversee a review of their policy wordings, keep the insured business informed regarding the test case, and confirm within three weeks of the guidance coming into effect whether the insured business’ claim or complaint is a test case.
The test case seeks the Court’s declarations on a number of questions, which include:
The full list of questions can be found at:
The Particulars of Claim can be found at:
All of the above questions and issues will require consideration by a professional advisor.
In the immediate term businesses should discuss their situation with their broker or their insurer direct. If a business has made a BI claim it should request in the first instance that the insurer confirms whether the claim is a test claim.
Notwithstanding the FCA’s test case, which will take some time before there is a decision, businesses should consider their insurance policies, make claims, and if the claim is declined or insurers reserve their position may have to place their broker on notice of an actual or potential claim.
In uncertain times, the only thing we can say for certain is that nothing will stay the same for long.
It is entirely possible, therefore, that new legislation will have been introduced which will mean that all or part of this briefing no longer reflects the current law.
Because of this, we ask you to consider that, although correct at time of printing, information in this sheet may no longer be up to date and it is always best practice to consult with a lawyer about anything contained in this briefing.
Our lawyers are available to help answer any of your questions about this or any other legal concern you have.
Please contact Fraser Dawbarns directly for up-to-date information on your specific circumstances.
New laws are being introduced and current legislation is regularly being updated. Although every effort has been made to ensure that information contained in this sheet is accurate, it may no longer be current at the time of reading. We strongly recommend consulting with a lawyer about your specific circumstances.
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