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Law360, London (May 18, 2020, 11:14 AM BST ) More than 400 small businesses planning to launch group litigation against Hiscox will for the first time use a law that allows policyholders to seek additional damages from an insurer that has dragged its heels over payment, lawyers said on Monday.
The group said it will take advantage of a 2016 act in its litigation over the crisis, as the FCA heads to the High Court in a separate move. (AP)
The group was formed after Hiscox declined to pay out on business interruption claims, even though policyholders had cover for the closure of a premises caused by an infectious disease outbreak.
"Many of our members have lost out because Hiscox has refused to pay out and forced us to go to these extraordinary lengths to get settlement," Daniel Duckett, a small business owner and one of the founders of the Hiscox group, said.
"The insurance provisions of the Enterprise Act will mean we can now not only recoup the money we are entitled to but also get significant extra payments to compensate us for our additional losses," he added.
The Enterprise Act, which came into force in May 2017, requires that "the insurer must pay any sums due in respect of the claim within a reasonable time." Policyholders can claim damages if an insurer takes too long to respond.
Mishcon de Reya said the case would be the "first time ever" there had been a claim under Enterprise Act.
Hiscox said in a statement that it understands these are "difficult times for businesses, and we are paying claims that are covered by the policies we issue fairly and quickly. As the FCA has said, most U.K. small business policies across the industry do not cover pandemics."
The U.K. does not allow U.S.-style class action suits, in which every individual or business belonging to a defined "class" is automatically included in a suit unless it opts out. Britain has a system of group litigation, but claimants have to opt in first and share legal costs.
The law firm said it intends to launch an "expedited arbitration claim" against Hiscox within days. Arbitration hearings are normally held behind closed doors, and their results do not enter into common law. Because of that, insurers are often more amenable to settlements reached through arbitration.
"For many of our members, this insurance is the difference between survival and bankruptcy, and we are determined that they should get the money they are entitled to as soon as possible," Simon Ager, another business owner and member of the group, said.
The Financial Conduct Authority plans to take a sample of representative policy wordings to court as early as July to get what it calls an authoritative declaratory judgment on whether insurers are responsible for paying compensation. The findings will be legally binding on insurers, the FCA said.
Mishcon partner Sonia Campbell said Friday in response to the FCA's statement that policyholders should continue to consider legal action as they submit their details to the regulator for inclusion in the test case.
"Our view remains that, because the FCA test case will not be determinative of individual policyholders' claims, policyholders should continue also to pursue their own insurance claims," she added.
--Editing by Ed Harris.
Update: This story has been updated to add comment from Hiscox.
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