Insurers named in FCA BI test case as some accept previously disputed claims

Several insurers in the UK have agreed to pay previously disputed business interruption (BI) claims for Covid-19 as the Financial Conduct Authority (FCA) named 16 insurers with policy wordings that will be included in its legal test case to provide coverage clarity. AIG, AXA, Chubb, QBE and Zurich are among those listed, with the latter two among eight insurers actively taking part in proceedings. The FCA announced on 1 May that it is going to ask the courts to provide legal certainty over BI insurance cover for Covid-19 pandemic losses to ensure customers are treated fairly. Many insurers have stated that their policies do not cover global pandemics and denied claims. The FCA will obtain a court declaration based on sample cases and BI policy wordings to resolve uncertainty for SMEs that have been closed in the government-ordered lockdown. Following consultation with buyers, the FCA has now identified a sample of 17 policy wordings that it believes capture the majority of the key issues that could be in dispute. It has also named 16 insurers that use at least one of the policy wordings to be examined in court. These are: Allianz Insurance plc (part of Allianz SE) American International Group UK Limited (part of American International Group Inc) Arch Insurance (UK) Limited (part of Arch Capital Group Limited) Argenta Syndicate Management Limited (part of Hannover Re) Aspen Insurance UK Limited (part of Aspen Insurance Holdings Limited) Aviva Insurance Limited (part of Aviva plc) Axa Insurance UK plc (part of AXA SA) Chubb European Group SE (part of Chubb Limited) Ecclesiastical Insurance Office plc Hiscox Insurance Company Limited (part of Hiscox Limited) Liberty Mutual Insurance Europe SE (part of Liberty Mutual Group) MS Amlin Underwriting Limited (part of MS&AD Insurance Group Holdings Inc) Protector Insurance UK (part of Protector Forsikring ASA) QBE UK Limited (part of QBE Insurance Group Limited) Royal & Sun Alliance Insurance plc (part of RSA Insurance Group plc) Zurich Insurance plc (part of Zurich Insurance Group Limited) The wordings they use can be found here. The FCA has asked eight of these insurers to take part in the High Court test case. These are: Arch Insurance (UK) Limited Argenta Syndicate Management Limited Ecclesiastical Insurance Office plc Hiscox Insurance Company Limited MS Amlin Underwriting Limited QBE UK Limited Royal & Sun Alliance Insurance plc Zurich Insurance plc Separately to the FCA’s work, there are already at least two separate class actions, against insurers Hiscox and QBE. The FCA said it approached 56 insurers in its review, which covered more than 500 polices from 40 different carriers. It said that as a result "a number of the relevant insurers decided to accept claims from policyholders with certain policies which included particular wordings which had previously been in dispute". The regulator added that its list of insurers and policy wordings is not exhaustive. It is publishing a short consultation on draft guidance asking all insurers to check their policy wordings against those it intends to test, to see if theirs will be impacted by the outcome of the case. The FCA expects to publish in early July a list of all the relevant insurers and policies that may have wordings that are impacted. The FCA has retained the services of Colin Edelman QC, Leigh-Ann Mulcahy QC, Richard Coleman QC and Herbert Smith Freehills to assist it in the case. It stressed that policyholders should not assume that simple inclusion of their policy wording in the case will mean their policies are responsive. “We are seeking a judgment that will help policyholders and insurers have a much clearer view of which business interruption policies respond to the pandemic and those that don’t. Therefore, the court may well decide a number of these policies respond to the pandemic and others do not,” it said. The FCA has also published proposed assumed facts, a proposed issues matrix and proposed questions for determination by the court. It invited comments from other insurers, policyholders and other stakeholders on these documents by 3pm on Friday 5 June. It has also issued a consultation on draft guidance to set out its expectations of all insurers handling BI claims and any related complaints during this period. The FCA said insurers should identify those policies where their decision to deny claims may be affected by the test case. The FCA added that Herbert Smith Freehills will be available on 3 and 4 June to speak directly with as many policyholders and intermediaries as possible. In response, Zurich said it welcomes the FCA’s actions aimed at bringing clarity on Covid-19 BI claims.It said it has received “limited claims” in relation to the policies that will be tested by the FCA and, based on received legal opinion, remains confident in its interpretation of UK policy wording. The insurer remains confident in its estimated $750m of Covid-19 claims for full-year 2020.

Insurers named in FCA BI test case as some accept previously disputed claims

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