For anyone asking ‘what now?’ following the Supreme Court’s ruling in the business interruption (BI) test case initiated by the Financial Conduct Authority (FCA), the regulator has outlined the next steps as the FCA appears bent on making things crystal-clear and devoid of confusion.
“We are working with the other parties to the test case, and the Supreme Court, to enable the Court to issue its declarations in the light of the judgement, which will summarise the various elements of the judgement for the policy wordings considered by the Supreme Court,” wrote FCA consumers and competition executive director Sheldon Mills in his ‘Dear CEO’ letter to insurers on Friday.
“We will update our BI webpage with these declarations as soon as possible.”
In the meantime, the watchdog has published a summary table aimed at assisting policyholders and other stakeholders in understanding the test case outcome in relation to the examined policy types. The table is available on the FCA website.
Meanwhile, in his letter, Mills made this clarification: “It remains the case that most SME BI policies are focussed on property damage and only have basic cover for BI as a consequence of property damage, so are unlikely to pay out in relation to the COVID-19 pandemic and its effects.
“However, some policies providing cover for BI from other causes, in particular infectious or notifiable diseases and non-damage denial of access and public authority closures or restrictions, do provide cover for these events.”
All insurers are, therefore, called on to promptly reassess all claims affected by the test case, not only those that were previously declined but also the ones that were not fully paid.
“We believe the court judgements in the test case give all insurers the clarity they need to now conclude their claims processes with the large majority of their BI customers,” asserted the executive director. “We encourage all insurers to do so as quickly as possible.
“In some cases the judgement will mean that previously rejected claims (and complaints) are now valid or that the value of customers’ valid claims will have changed.”
Additionally, the FCA expects insurers to take a “pragmatic, transparent, and consistent approach” to how they interact with policyholders over remaining evidence and loss adjusting processes. The goal, according to the regulator, is to avoid creating additional barriers or delays to compensating valid claims.
Mills also noted: “We will shortly send out a new data request for updated details of all BI policies that respond to the COVID-19 pandemic following the Supreme Court judgement, replacing the need for insurers to update the information provided to us under Chapter 5 of our guidance.”
Similarly, information on the progress of non-damage BI claims will also be requested.
“Where there are further disputes that are the subject of legal proceedings,” added the FCA official, “firms should consider the significant costs faced by policyholders bringing legal proceedings to clarify any remaining areas of uncertainty.
“Firms should seek to narrow the issues in dispute to ensure that the litigation can proceed in the cheapest and quickest way possible, reflecting the firm’s obligation to act fairly, honestly, and professionally in the best interests of its customers.”
