On 15 May 2020, the Financial Conduct Authority issued a statement setting out how it is engaging with policyholders and insurance intermediaries on business interruption insurance. The FCA said a large number of BI claims are being made and referred to widespread concern about the response of some insurers.

On 1 May 2020, the FCA announced it would obtain court declarations aimed at resolving contractual uncertainty in relation to selected BI insurance policies. It intends to seek the court’s view on relevant policies as soon as possible and has said it will act in the public interest in putting forward policyholders’ arguments to their best advantage. The process is designed to assist policyholders, and particularly SMEs, whose claims are being refused when they think the insurers should respond.

The FCA recognises that many claims will already be underway and the intended action will not prevent individuals from pursuing issues through other dispute resolution methods.

The FCA has indicated the result of the test case “will be legally binding on the insurers that are parties to the test case in respect of the representative sample considered” and hopes it will provide persuasive guidance for the interpretation of similar policy wordings and claims that can be taken into account in other court cases.

The FCA acknowledges that the facts will vary as between different policyholders and the issues relevant to the intended proceedings will be wide-ranging and complex. Referring to its consumer protection and market integrity objectives, the FCA recognises that the proceedings should aim to cover as broad a cross section of policies and issues as possible in the context of an expedited court process.

The FCA is inviting policyholders and insurance intermediaries to provide information (the policy, the facts and the coverage arguments) about claims that might be appropriate to be included in the test case. The FCA has given an assurance that it will treat information it receives as confidential and covered by the FCA’s litigation privilege “meaning [the FCA] would be entitled not to produce it to a third party or the court”.

The FCA has asked for information to be provided within a tight deadline, by Wednesday, 20 May, and will use that information to choose the policy wordings, arguments and fact patterns to be considered in the test case. Where possible, the FCA will make public all pleadings and other material relevant to the test case.

Policyholders will no doubt wish to balance any potential benefit (especially in relation to efficiency and speed) in participating in the FCA’s initiative against the strategic advantage of keeping their individual claim outside the process.

By Richard Hopley

Posted by Richard Hopley