Business Interruption Insurance – FCA Court Proceedings Likely
The FCA is in the process of writing to a number of insurance companies seeking clarification about whether they are declining, or intend to decline business interruption insurance claims. The FCA expects the insurers in question (including AXA, QBE and Hiscox) to clarify their position, by no later than by Friday 15 May 2020.
Based on the information obtained from this exercise, the FCA will then consider which firms to join into court proceedings which, Clarke Willmott understands, will seek declarations from the High Court as to the scope of cover under the relevant business interruption policy conditions.
Christopher Woolard, Interim Chief Executive of the FCA, stated that:
‘We have been clear that we believe in the majority of cases, business interruption insurance was not purchased to, and is unlikely to, cover the current emergency. However, there remain a number of policies where it is clear that the firm has an obligation to pay out on a policy. For these policies, it is important that claims are assessed and settled quickly. There are also some other policies where firms may consider there is no doubt about wording and decline to pay a claim, but customers may still consider there is genuine uncertainty about whether their policy provides cover.
‘Our intended court action is designed to resolve a selected number of key issues causing uncertainty as promptly as possible and to provide greater clarity for all parties, both insured and insurers. It is clear that decisive action is appropriate given the severity of the potential consequences for customers.
‘In addition to this court action, the current emergency has altered the value of some insurance products and we believe that insurers should be looking at both whether their products still offer value. Firms should also look at how they can help customers who may be experiencing financial difficulties as a result of the virus. Many insurers are already taking some kind of action to assist their customers and we want to see a degree of consistency for consumers’.
Many businesses across the UK, particularly in the leisure, hospitality and retail sectors, will anxiously await the outcome of this process. The FCA has indicated that it intends to ask the High Court to deal with matters on expedited basis by way of a hearing which could take place as early as July 2020.
Clarke Willmott is currently advising a large number of commercial clients in relation to business interruption insurance claims.