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Law360, London (May 1, 2020, 10:18 AM BST ) The Financial Conduct Authority said on Friday it will urgently seek judgment at the High Court on insurers' liability in a range of business interruption policies, as hundreds of companies struggling under the countrywide lockdown seek to challenge blanket rejections of their claims.
The FCA said it will take to court a sample of policy wordings that have triggered uncertainty over liability as it seeks an "authoritative declaratory judgment." (AP)
Several groups have been formed with the aim of pursuing joint litigation against insurers. They claim that policies for business interruption covered "non-damage" losses arising from a notifiable disease outbreak or through denial of access by a public authority.
More than 200 small businesses have joined a group targeting insurer Hiscox, but a second group was formed on Wednesday to pursue action against a dozen other insurers.
The FCA says it is seeking a court declaration, "on an agreed and urgent basis," to resolve uncertainty for many businesses making pandemic-linked interruption claims.
"We have been clear that we believe, in the majority of cases, business interruption insurance was not purchased to, and is unlikely to, cover the current emergency," Christopher Woolard, interim chief executive of the FCA, said. "However, there remain a number of policies where it is clear that the firm has an obligation to pay out on a policy."
The regulator said it would identify the most frequently used policy wordings, and — with the agreement of insurers — take them to court to obtain a ruling. The City watchdog is writing to several insurers asking them if they are declining to pay out on claims and asking them to clarify their position.
Based on that, it will decide which insurers should join the court process.
'Our intended court action is designed to resolve a selected number of key issues causing uncertainty as promptly as possible and to provide greater clarity for all parties, both insured and insurers," Woolard said. "It is clear that decisive action is appropriate given the severity of the potential consequences for customers."
The Association of British Insurers and the British Insurance Brokers' Association gave their support for the FCA court action.
Huw Evans, director general of the ABI, said insurers would "work closely with the regulator to make this process a success."
A spokeswoman for BIBA said brokers had serious concerns over whether customers would recover from the lockdown.
"This intervention from the regulator to create certainty for many customers making business interruption claims and the basis on which firms are making decisions on claims is a step in the right direction," she added.
In a separate move, the FCA urged insurers to assess the value of insurance products, and ask whether some aspects of cover offered were appropriate during the crisis.
"This might include changing how benefits are delivered, refunding some premiums or suspending monthly payments for a certain period of time," the regulator added.
The U.K.'s largest motor insurer, Admiral, has offered its 4.4 million auto insurance customers a £110 million ($136 million) premium rebate based on vehicles not being used on roads as frequently during the lockdown.
An insurance trade body in Ireland has launched an initiative calling for members to refund motor premiums to customers, but the ABI has so far refused to take a similar stance, saying the matter is for individual companies.
--Editing by Ed Harris.
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