Marsh and RSA clash over FCA BI test case wording as brokers dragged into the mix

Marsh and RSA have clashed over a business interruption (BI) wording provided by the broker that is involved in the Financial Conduct Authority’s (FCA) test case. The insurer said Marsh and its clients should be liable for any contract ambiguity, whereas the broker argues it should fall on RSA. Eight insurers – Arch Insurance, Argenta Syndicate Management, Ecclesiastical, QBE UK, RSA and Zurich Insurance – put forward their defences for the FCA’s High Court test case last week. Most claimed the policies were not designed to cover pandemics and used proximate cause, where policies cover closure in response to an infectious disease within a certain distance of the business that directly caused the business interruption, rather than a global outbreak. Insurers also argued that businesses would have suffered the same losses if they had remained open as the nation locked down. But, as experts predicted, one or two of the insurers flagged that some of the wordings were put forward by brokers and therefore the insurers should not be held liable. The FCA has made clear it that will rely on the contra proferentem argument if necessary in the case. This would mean the interpretation of an ambiguous contract would go against the party that proposed or drafted the contract or clause. This would more likely place insurers on the hook for disputed claims. RSA has four wordings in the case. This includes The Marsh Material Damage and BI - Resilience and Jelf Material Damage and BI – Resilience wording put forward by Marsh, or its subsidiary Jelf. RSA explained these policies were bought by both large businesses and SMEs. RSA believes the wording is “unambiguous” and has therefore denied contra proferentemis valid. “The meaning and effect of the RSA wordings is, for the reasons set out herein, unambiguous. Accordingly, and also because no relevant ambiguity is asserted by the FCA, it is denied that the contra proferentem rule is relevant or applicable to the FCA’s claims in this litigation,” its defence stated. But RSA also argued that because the wording was created by Marsh, the broker, or more pertinently, the clients it represents, should he held liable for any ambiguity. RSA noted in its defence that it did not offer the wording to policyholders. It was a “standard broker form of wording on which RSA was invited (by Marsh/Jelf on behalf of policyholders) to underwrite risks presented to RSA”, it said. It also said the wording was “drafted by Marsh/Jelf, who acted as agents for the relevant insureds”, adding: “In such circumstances, the insureds (and not RSA) would fall to be treated as the proferens.” A spokesperson from Marsh hit back at RSA’s protestations. “The view of the FCA, which Marsh shares, is that the ‘Resilience’wording is clear and there is cover for Covid-19 claims, for which the insurer is liable,” the spokesperson said. “The Resilience wording also clearly states that ‘this policy wording is accepted by and adopted as the wording of the insurer, notwithstanding that the policy or part thereof, may in fact, have been put forward in part or full by the insured and/or its brokers or other representatives’. As such, any ambiguity would be construed in favour of the insured,” they added. RSA also explained that the Marsh wording was used by a number of different insurers. This includes Zurich and QBE, which are also involved in the FCA’s test case, as well as AIG and Aviva, which are not. But the FCA has already made clear that other insurers holding the same policy or wordings will be governed by the case’s findings.

Marsh and RSA clash over FCA BI test case wording as brokers dragged into the mix

Want to read this article?

Read Next

Marsh tracks slowdown in global Q1 rate hikes

Markel names head of terrorism in London

Insurers defend Nord Stream’s €400m lawsuit as act of war

Allstate posts nat cat loss of $343m for March

UAE flash flood losses manageable as insurers adapt to changing weather

Marsh tracks slowdown in global Q1 rate hikes

Markel names head of terrorism in London

Insurers defend Nord Stream’s €400m lawsuit as act of war

Allstate posts nat cat loss of $343m for March

UAE flash flood losses manageable as insurers adapt to changing weather

Want to read this article?

Read Next

Marsh tracks slowdown in global Q1 rate hikes

Markel names head of terrorism in London

Insurers defend Nord Stream’s €400m lawsuit as act of war

Allstate posts nat cat loss of $343m for March

UAE flash flood losses manageable as insurers adapt to changing weather

Related Articles