Business Interruption Insurance: FCA announce test cases to proceed
On 1st June 2020 the Financial Conduct Authority (FCA) announced that it would be pursuing test cases against 17 different insurers in relation to the interpretation of the their business interruption insurance policy wording.
These 17 insurers have agreed to take part in the test cases and an agreement has been signed between the insurers and the FCA as to the conduct of the case. It has been agreed a claim will be issued by 9th June and that the parties will make an application for the expedition of this case by the same date.
The court will review the policy wording from the listed insurers and make a finding on the interpretation of that wording. The FCA has published a sample of the proposed wording it intends to seek clarity on.
The idea is to seek clarification early on, so that policy holders are not subject to long delays and the high cost of litigation.
Please note that any finding by the court is not a guarantee either way. There may be circumstances specific to your claim that the insurer should take into account when determining whether cover should be provided. However, the decisions are intended to make the claims process clearer and easier for all involved.
What does this mean for my claim?
If the court interprets the wording in favour of the policy holder then it is likely that the insurer, subject to any appeals against the court’s decision, will accept any claims made.
Even if your insurer is not listed on the FCA’s list, any decision on interpretation may have an influence on all insurers and how they handle claims. For example, the court could make a finding on what a notifiable disease is if it is not already defined in the policy elsewhere.
You should submit your claim as normal and wait for any rejection. You may also wish to submit a complaint if your claim is rejected so that you then have the option of proceeding to the Financial Ombudsman (FO).
However, we would recommend waiting for the outcome of these test cases before submitting a complaint to the FO or issuing any court proceedings. The outcome of the test cases is likely to have a significant impact on all business interruption insurance claims.
Remember, if you do wish to pursue a complaint to FO you must submit it within 6 months of the outcome of any internal complaint.
Whilst this is likely to cause delays to your claim, the test cases will proceed much quicker than any court action and could help you avoid huge legal costs; the minute you sign a ‘no win, no fee’ agreement it is likely that the lawyer will be entitled to a percentage of your claim irrespective of the work that may have been undertake at that time. If the insurer ultimately offers you a settlement payment in light of the outcome of the test case, you may end up paying a lawyer for doing nothing. Therefore at this stage, given this announcement, we would advise caution when entering into such agreements.