The Monetary Conduct Authority (FCA), which regulates the conduct of insurers and different insurance coverage intermediaries within the UK, has confirmed that the take a look at case on enterprise interruption (“BI”) insurance coverage claims was launched within the Excessive Court docket on 9 June 2020. The purpose of the take a look at case is to acquire courtroom declarations aimed toward resolving the contractual uncertainties across the validity of sure BI claims arising from COVID-19 and the controls imposed by the UK authorities. The motion has been prompted by the widespread concern concerning the “lack of readability and certainty” for policyholders making these claims, significantly small and medium-sized enterprises (SMEs), and the grounds on which some insurers are looking for to disclaim cowl.
What is going to the take a look at case determine?
The outcomes of the take a look at case will likely be legally binding solely on these insurers who’re events to the motion in respect of the interpretation of the pattern coverage wordings underwritten by these insurers which will likely be thought of by the courtroom.  Nevertheless, the FCA means that the case will present “persuasive steerage” for the interpretation of comparable coverage wordings and claims, the intention being that this may be taken under consideration by the FCA (and by the Monetary Ombudsman Service) in taking a look at whether or not different insurers are dealing with claims pretty. The FCA expects to publish an inventory in early July 2020 of different insurance coverage insurance policies which can be affected.
The FCA has acknowledged that the take a look at case won’t embody all doable disputes and its purpose is to resolve “some key contractual uncertainties and “causation” points” within the pursuits of offering some readability to policyholders and insurers. It won’t decide how a lot is payable underneath particular person insurance policies however the intention is that the case will present the premise for doing so.
The FCA has already been by way of an preliminary session course of throughout which it sought enter from policyholders and insurance coverage intermediaries in relation to the factual and authorized points to be decided by the courtroom. It’s clear from this course of, and from the pleadings within the motion, that the FCA has determined to not embody BI claims based mostly on bodily injury to insured property. The motion will concentrate on BI claims underneath protection extensions which aren’t depending on bodily injury, generally known as “denial of entry” and “notifiable illness” extensions. The take a look at case might subsequently be of specific curiosity to policyholders that take pleasure in such extensions. The motion will even handle causation points, together with uncertainty across the operation of “enterprise developments” clauses, and the potential applicability of sure coverage exclusions referring to air pollution and contamination.
What does this imply for policyholders?
The FCA has acknowledged that many BI claims will already be the topic of negotiation or different dispute decision course of. The proposed motion just isn’t supposed to affect this regular claims course of however is designed to help policyholders, significantly SMEs, whose claims are being refused in circumstances the place they suppose the coverage ought to reply. The FCA makes clear that the take a look at case won’t forestall policyholders from pursuing claims by way of negotiated settlement, arbitration, or courtroom proceedings, nor will it forestall people (or small companies) from making eligible complaints to the Monetary Ombudsman Service.
The FCA proposes an expedited timetable with defences from insurers being filed by 23 June 2020 and a courtroom listening to within the second half of July 2020. That is an bold timetable by any requirements and the FCA has acknowledged that there stay quite a lot of uncertainties to the timeline, which has not but been permitted by the courtroom.  These uncertainties, together with the truth that the ultimate consequence of the take a look at case could also be topic to enchantment, imply that policyholders might want to take into account fastidiously whether or not their pursuits will likely be greatest served by merely awaiting the end result, significantly if their insurers should not defendants to the motion. On the very least, policyholders want to make sure that discover has been given to insurers in respect of any enterprise interruption losses, significantly if the coverage is developing for renewal. The indications are that insurers will likely be imposing extensively drafted exclusions for COVID-19 associated losses going ahead.
Policyholders with extra vital and sophisticated enterprise interruption claims might have to undertake a extra pro-active method and proceed taking steps to progress their declare within the regular method. Provided that the first focus of the take a look at case is on SMEs, bigger industrial organisations, significantly these with a number of areas and/or a number of companies operations impacted in several methods, might decide that the take a look at case may have no or solely restricted affect, significantly in as far as their insurance policies differ from the pattern wordings put ahead by the FCA.
No matter method particular person policyholders determine to take, the FCA has acknowledged that it proposes to proceed participating with policyholders and insurance coverage intermediaries at key phases throughout the take a look at case. The FCA is keen to contemplate authorized arguments and factual circumstances communicated to them by policyholders or their representatives. There will likely be an specific invitation for feedback to be supplied by policyholders shortly after the insurers have filed defences (at the moment anticipated by 23 June 2020) to make sure such feedback are mirrored within the FCA’s reply (which it expects to file on three July 2020) and within the written submissions ready for the ultimate courtroom listening to. Now we have already made submissions to the FCA on behalf of sure policyholder purchasers and can be pleased to help different policyholders with specific considerations.