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FAQs about the Business Interruption FCA Test Case

The coronavirus (COVID-19) pandemic has put the cover provided by non-damage Business Interruption (BI) insurance in the spotlight.

In a bid to seek clarity and certainty around this issue, the Financial Conduct Authority (FCA) has announced its intention to hold a ‘test case’ action in court against what they deem to be a range of non-damage BI policy wordings that are representative of those used throughout the insurance industry. The aim of the FCA’s test case is to determine in court the interpretation of certain policy clauses within non-damage BI policies, which will provide greater clarity for insurers and policyholders in the handling of COVID-19-related claims.

We wanted to provide you with some answers to the most common questions we have been asked. If you have any further questions, please speak with your usual Broker contact.

 

Overview

  • What is the FCA and why are they involved?
    • The FCA stands for Financial Conduct Authority and it is the UK regulator that oversees General Insurance.
    • They are involved because there is confusion in policy interpretation and application of indemnity on a small number of policies and so have chosen to champion the policyholder in a fast-tracked court hearing.
  • Why is this relevant to me?
    • It is applicable to some of those who have Business Interruption cover with a public authorities extension, following the government announcement of closure under the Public Authority Clause invoking closure of all businesses from 23rd March 2020.
  • Why are you explaining this?
    • We are required by the regulator to inform all policyholders and alert them to this FCA court case. It may not apply to you; however, we are required to bring this to your attention.

 

Business Interruption

  • What is Business Interruption Insurance?
    • Business Interruption insurance provides cover for the period during which your business has been affected by an insured peril. In this particular instance, it is as a result of a public authority clause being triggered by the government. Some policies provide an element of cover for this in certain circumstances.
    • Most policies will specifically list identified diseases they intend to cover, however some policies will say “any infectious disease” which is still open to judicial challenge.
  • Do I have Business Interruption insurance?
    • This is only applicable to a small number of businesses who have taken out Business Interruption insurance and only where the wording of certain extensions may be interpreted as potentially providing cover.
    • Domestic policyholders, and policies such as motor fleet and private medical insurance, will not have this cover.
    • Please check your policy documents for this information.
  • I have Business Interruption insurance, does this mean I am covered?
    • Not necessarily, and this is exactly the subject matter of the FCA court case.
  • Can I buy Business Interruption for COVID-19 now?
    • As of renewal and new policies, all Business Interruption policies will be clarified to exclude claims arising from COVID-19 as pandemics were never intended to be covered.

 

Claims

  • I have not yet made a claim, should I now do so?
    • We would encourage you to do so if you feel you have a legitimate claim. You can do this via ourselves immediately.
  • My claim has already been submitted; will this cause any delays?
    • For those insurers who have confirmed cover, we do not expect any additional delay. However, for those policies which are in dispute over cover, the outcome will be known following declaratory judgement.
  • My claim has already been logged and declined – do I need to do anything else?
    • At this moment, no further action is required. All insurers are required to communicate by the 15th  July.

 

The FCA Test Case

  • What will the outcome of the test case be?
    • At the point of writing, the court case will commence on 20th July and the trial will last 8 days. Please see the FCA website for up to date information.
  • When will I find out the outcome and who will tell me?
    • Depending on the outcome scheduled for the end of July, our website will be updated and a communication will go out to those affected policyholders.

 

Next Steps

  • What do I need to do about this?
    • If you have already submitted a claim, then this will be addressed in due course.
    • If you haven’t yet submitted a claim, we would encourage you to do so if you feel you have a legitimate claim.