FCA asks the courts for guidance on Business Interruption cover. Published June 2020

June 9, 2020 11:19 am Published by

The COVID-19 pandemic has affected a huge number of businesses, leading some to make claims on their Business Interruption (BI) policies.  Most BI policies do not provide cover for pandemics but there are a small number where the wording is unclear.  The FCA has now asked the courts to rule on whether cover should be provided in these cases.

Brown gavel and law book in court

The FCA sent a ‘Dear CEO’ letter to insurers in mid-April.  This accepted that most policies have no obligation to pay out in relation to the COVID-19 pandemic.  Where there is pandemic cover the FCA has told insurers to pay out promptly and to make interim payments on policies where there are reasonable grounds to pay part of the claim.

Now the regulator has announced that it is seeking court guidance on BI policy wordings where there is uncertainty about the level of cover.  It will ask the court to rule on a representative sample of the most frequently used policy wordings that are causing uncertainty.

Christopher Woolard, Interim Chief Executive of the FCA, said: “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.”

James Burgoyne of Brunel Professions says a ruling will be helpful to the FCA as it would take away the need for it to get involved in disputes where there was no cover. “A court ruling could also have a knock-on effect on Ombudsman decisions as it would be clear whether or not the policy covered business interruption arising from the pandemic,” he added.

The FCA’s ‘Dear CEO’ letter and press release about its court action have been published on the regulator’s website.  Reports about the issue have been published by Fenchurch Law, Eversheds Sutherland and Pinsent Masons.

Professionalindemnity.com is owned by Brunel Professions, which is a leading professional indemnity insurance broker in the UK.  Click here to get a quote or call 0345 450 1074 to speak to a broker.

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This post was written by James Burgoyne

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