FCA update on business interruption insurance

Pete Singfield, Alan Hughes and James Gliddon have written previously about insurers denying cover for Business Interruption Insurance in the context of the lockdown and Coronavirus. The starting point is that most SME insurance policies are focused on property damage (and only have basic cover for BI as a consequence of property damage). So, as the FCA has said (including in its Dear CEO letter) for most policies insurers are not obliged to pay out in relation to the coronavirus pandemic.

However, the FCA has identified policies which do provide for a communicable or notifiable disease extension where there is a dispute about cover and is progressing a test case to get a view from the Courts on policy wording. That includes some of the issues that have achieved publicity including the need for designation of Covid-19 as a notifiable infection, the need for an authority to mandate closure of premises, and whether the policies require the infection to be present at, or within a certain radius of insured premises. Working with three QCs and Herbert Smith the FCA has issued a press release today providing further detail on the test case, including the insurers who use the wording that is going to be featured in the case, and the policy wording:

https://www.fca.org.uk/news/press-releases/update-fca-test-case-validity-business-interruption-claims

https://www.fca.org.uk/publication/corporate/bi-insurance-test-case-proposed-representative-sample-of-policy-wordings.pdf

This is welcome further detail and comes after a decision in the French Courts last week in which AXA were ordered to satisfy claims for insureds. Helpfully, the FCA has published alongside the sample clauses some assumed facts and a list of the questions they're going to be asking the Court to determine:

https://www.fca.org.uk/publication/corporate/bi-insurance-test-case-proposed-questions-for-determination.pdf

The call to action from the FCA is to "invite comments from other insurers, policyholders and other stakeholders on these documents by 3pm on Friday 5 June". If you think you have insurance that may be the same as, or similar to, that featured in the FCA's test case, and want a view, please feel free to get in touch with your usual contact or Pete, Alan or James.