The FCA has published updates1 on the progress of its court action on business interruption (BI) insurance policies to claims arising out of COVID-19.
Since its original announcement on 1 May, which we reported on here2, the FCA has approached 56 insurers and reviewed more than 500 relevant policies. It has identified a representative sample of 17 policy wordings – which can be found here3 – capturing the majority of key issues that could be in dispute.
The FCA’s web page update includes a (non-exhaustive) list of insurers which were invited by the FCA, and which have agreed, to participate in the proceedings, as well as the policy wordings they use. One important point which the FCA has made is that policyholders should not assume that inclusion of their policy wording in the test case will mean that their policy covers losses suffered as a result of Covid-19.
The FCA filed its claim on 10 June4 and the first Case Management Conference took place on 16 June. At this hearing, Mr Justice Butcher ordered that the case should be heard on an expedited basis, that the Financial Markets Test Case Scheme will apply, and that further hearings will be live-streamed. Insurers are due to file their Defences on 23 June, and a second Case Management Conference will take place on 26 June.
The substantive hearing is scheduled to take place over eight days from 20 July and will be heard by Mr Justice Butcher and Lord Justice Flaux.
The FCA has clarified that it is seeking a judgment that will provide greater clarity on which BI policies respond to the pandemic. The FCA reiterated that, as most SME insurance policies focus on property damage, at least in the majority of cases insurers will not be obliged to pay claims relating to COVID-19.
Alongside these updates, the FCA has published Finalised Guidance5 setting out the FCA’s expectations of firms handling BI claims and any related complaints during the test case, and a Feedback Statement summarising the feedback received on the draft guidance published on 1 June. It has also asked insurers to check their policy wordings to see if they will be impacted by the test case’s outcome and to write to all policyholders who have made a claim arising out of COVID-19 to confirm whether or not their claim is affected by the test case.