Large firms could also benefit from FCA’s test case, says claimant lawyer

Large corporates may stand to benefit from the Financial Conduct Authority’s (FCA) business interruption (BI) test case, which finished last week in the UK High Court, one of the claimant lawyers told Commercial Risk Europe. It was revealed during the test case hearing that up to 370,000 UK businesses may be covered by potentially responsive BI insurance policies. The fast-tracked case has been brought by the FCA, predominantly on behalf of small to medium-sized enterprises (SMEs), against eight insurers that have denied Covid-19-related BI claims. The case is testing 17 representative wordings to ascertain whether they provide cover for Covid-19-related BI. The resulting judgments will be legally binding on the eight insurers – Hiscox, QBE, RSA, Zurich, Arch, Argenta, MS Amlin and Ecclesiastical. But the FCA said the findings will also provide “persuasive guidance” for the interpretation of similar policy wordings and claims among other insurers. The Hospitality Insurance Group Action (HIGA) and Hiscox Action Group (HAG) were also allowed to participate in the test case on behalf of the policyholders they represent. For the last two weeks, the court has heard legal submissions in relation to the policies of the eight insurers. The judgment is expected in September. Sonia Campbell, the Mishcon de Reya partner leading the action on behalf of HIGA, said: “It is surprising how many businesses may be covered for Covid-19 business interruption losses and yet how few have submitted formal claims. The insurance industry has spent many months telling businesses they don’t have cover and many policyholders have accepted that at face value. In the context of the ongoing test case, the insurers' comments may not be correct.” She said the case was brought primarily to seek legal clarity and certainty for the benefit of all stakeholders. Covid-19-related losses and the resultant effects on SMEs are particularly acute, said Ms Campbell. “However, loss and distress are not solely being sustained by SMEs, and the court's findings will be applicable to many larger policyholders,” she told CRE. Ms Campbell stressed that her firm acts for a number of larger policyholders affected by many of the same BI wording issues under the FCA’s spotlight. If successful, she said there are likely to be subsequent claims for losses incurred as a result of non-payment of BI policies. Ms Campbell urged affected businesses to join the action. “With some 370,000 businesses affected, it is clear that there are many more businesses out there yet to pursue their claims. There is still a window to do so – particularly if you are a hospitality business with a QBE or Aviva policy. You can still get in touch with us. Our legal action is underwritten by one of the world’s leading litigation funders, so you don’t have to pay legal costs to join our action group,” she said. HIGA has reviewed more than 500 policies for companies across the hospitality industry. It said there appears to be a common concern among policyholders that they have been discouraged from pursuing insurance claims due to comments made by insurers and others in the industry who have suggested that there is no cover for Covid-19 BI losses because, for example, the policies do not cover pandemics. This may not be correct, believes the action group. Meanwhile, more calls for insurers to pay claims in full continue. The #justpayit campaign includes self-caterers from across the UK who are calling out insurers that are deducting the value of government grant money from payouts made to businesses on policies related to Covid-19. The UK government set up the Small Business Grant Fund to support small businesses through lockdown and help them meet the cost of being Covid-secure to reopen. Some major insurance companies are reported to have deducted the value of grants from insurance payouts made on policies taken out pre-Covid-19 to cover BI and advanced booking cancellation. The #justpayitcampaign is organised by the Professional Association of Self Caterers UK (PASC UK), which represents small, family-run, self-catering accommodation businesses, and the Cottagesure Action Group. Both Lloyd’s underwriters and Axis have reviewed their position and stopped deducting grants from payouts. NFU Mutual’s position has also changed with regards to deducting grants on some policies. Alistair Handyside, executive chairman for PASC UK, said: “Although the test case has closed, we are determined to battle on and continue with the campaign until this issue is resolved. It’s great news that some insurance companies are starting to see the error of their ways – these changes of position clearly show there is no industry rule that says insurers have to deduct grants from payouts.”

Large firms could also benefit from FCA’s test case, says claimant lawyer

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