17th January 2021

The UK Supreme Court substantially allowed FCA’s appeal on behalf of policyholders regarding BI claims test case

The UK Supreme Court has delivered its judgment in the Financial Conduct Authority’s (FCA)’s business interruption insurance test case.
The Supreme Court has substantially allowed the FCA’s appeal on behalf of policyholders. This completes the legal process for impacted policies and means that many thousands of policyholders will now have their claims for coronavirus-related business interruption losses paid.
Sheldon Mills, executive director, Consumers and Competition at the FCA, comments "Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. This test case involved complex legal issues. Our aim throughout this test case has been to get clarity for as wide a range of parties as possible, as quickly as possible, and today’s judgment decisively removes many of the roadblocks to claims by policyholders.
We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible. Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.
As we have recognised from the start of this case, tens of thousands of small firms and potentially hundreds of thousands of jobs are relying on this. We are grateful to the Supreme Court for delivering the judgment quickly. The speed with which it was reached reflects well on all parties."
Huw Evans, ABI Director General, said “Insurers have supported this fast-track legal process every step of the way and we welcome the clarity that the judgment will bring to a number of complex issues. Today’s judgment represents the final step in the appeal process.
The insurance industry expects to pay out over £1.8bn in COVID-19 related claims across a range of products, including business interruption policies. Customers who have made claims that are affected by the test case will be contacted by their insurer to discuss what the judgment means for their claim. All valid claims will be settled as soon as possible and in many cases the process of settling claims has begun. Some payments have already been made where valid business interruption claims have not been impacted by the test case ruling.
“We recognise this has been a particularly difficult time for many small businesses and naturally regret the COVID-19 restrictions have led to disputes with some customers. We will continue to work together as an industry to ensure customers have the clarity they need when it comes to what they can expect from their business insurance policies.”
Matt Connell, director of policy and public affairs of the Chartered Insurance Institute(CII), comments “This pandemic has had a disastrous effect on our society, our way of life and our economy, so I genuinely hope this will provide a conclusion to a difficult journey many people and businesses have had to experience over the last year.
This judgement will have huge ramifications for insurance beyond business interruption and it is important this is also looked at as openly as possible.
Rest assured insurance professionals will be examining how this affects policies and will reach out to policyholders about what this means for them, indeed in some cases this process will have already begun.
The CII has long discussed the importance of trust and confidence in insurance and we believe both can be restored if this process remains open and transparent to the public. We recently released guidance in collaboration with the ABI, BIBA, and our members, to support professionals close the gap between what customers expect insurance products to do and what they deliver, and we will continue to engage on this matter.”
Steve White, BIBA ceo said “The judgement today in the Supreme Court which substantially ruled in favour of the FCA is good news for many businesses that bought an unspecified disease extension.
The application of COVID-19 as a peril in relation to business interruption insurance is a highly complex matter which is why, from the outset, we welcomed the FCA intervention in bringing this test case and the ultimate clarity the judgement now brings.
What is needed now is for insurers to act swiftly to settle claims fairly and to clearly communicate the next steps in the process with brokers to allow them to help and advise their customers.
Though the judgement is welcome, it does not detract from the need for the insurance sector to provide greater clarity about the operation of cover. We will be taking the time to study the judgement in detail and will provide guidance to our members on what it means for them and their customers.
Looking forwards the UK needs a long-term answer that provides a solution to help businesses and people cope financially with any future pandemic and BIBA is committed to working across industry and Government to help deliver this.”
Commenting on the Supreme Court’s decision to rule in favour of policyholders in the landmark Financial Conduct Authority (FCA) business interruption insurance test case, the Federation of Small Businesses(FSB) National chair Mike Cherry said “Today’s judgement is a big victory. It cements the High Court’s decision to grant businesses left on the brink the insurance pay-outs they are rightfully owed. For many, it has been a long and difficult road to get to this stage so this will bring clarity and hope to the thousands of firms which have been left in financial limbo for almost a year.
While this is good news, and while the law has to follow procedure, it’s disappointing that so many small businesses have had to wait to get the money they desperately need under policies they believed were there to protect them, policies they bought in good faith.
“Businesses deserve to be protected in a timely way, but instead they have been failed by their insurers and are now trying to make up for lost time. Providers must now pay-out quickly, and consider the steps they can take to progress these claims in a swift and seamless manner. Any paperwork required of claimants shouldn’t be onerous or time-consuming.
Small businesses contribute trillions to the economy. The FCA was right to argue that disease or denial of access clauses within interruption policies should trigger pay-outs in the event of coronavirus-linked disruption. We are hugely grateful for its work in this space.”
Insurance Newslink comments "This has been a complex and sensitive issue for insureds and insurers. The Supreme Court decision will influence outstanding issues in other countries globally, policy wording clarity, and insurance industry/Govermental collaboration in the future."

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