FCA prepares for Supreme Court judgment with BI disease clause guidance

UK regulator the Financial Conduct Authority (FCA) has prepared draft guidance to prove the presence of Covid-19 for business interruption (BI) claims, ahead of a judgment from the Supreme Court on policy wordings.

The FCA said in a consultation paper that it has used the original High Court judgment in its BI test case for the guidance. In that ruling, the High Court referenced evidence that policyholders can use to prove the presence of Covid-19 around their premises to claim on BI policies. This aspect of the High Court judgment is not subject to appeal.

The FCA guidance sets out types of evidence and methodologies policyholders can use, along with the FCA’s views on how insurers should assess the evidence in “handling claims fairly”.

The Supreme Court heard appeals from both insurers and the FCA in November, following the High Court test case ruling on BI claims payments. It found in favour of policyholders in 12 out of 21 policies, and in favour of insurers in the other nine.

The FCA said draft guidance on the presence of Covid-19 can kick in as soon as possible if the Supreme Court upholds the High Court judgment, and speed up payments to policyholders. The Supreme Court is expected to return its judgment by January 2021.

“The draft guidance builds on the High Court’s judgment and is intended to ensure that the process of proving the presence of coronavirus is made as simple as possible for eligible policyholders,” the FCA said.

The consultation runs until 18 January 2020. Any guidance issued would stay in place until 31 December 2021.