FCA reply following the Supreme Court’s judgment in the business interruption insurance test case Jan 2021

FCA has updated its website following the Supreme Court’s 15th Jan 2021 judgment in the business interruption insurance test case.  It has:

  • The key message is that insurers and managing agents must keep up the pace so that all policyholders with valid claims get their payments as soon as possible. 
  • The letter notes:
    • that it remains the case that most SME BI policies are focused on property damage and so have only basic BI cover as a consequence of property damage, but some do provide BI cover for other causes, in particular infectious or notifiable diseases and non-damage denial of access and public authority closures or restrictions.  FCA says the judgments should now give insurers all the clarity they need on the vast majority of claims, and expects them to write to all affected policyholders by end of Jan 2021.
    • that more policyholders may have larger claims as a result of the Supreme Court (a) deciding that two additional policy types provide cover, (b) confirming cover may be available for partial closure and (c) saying that claims should not be reduced because the loss would have occurred in any event from the pandemic.
    • that where firms have already made a full and final settlement, they should check that information they provided to customers was clear, fair and not misleading, and that at the time the policyholders were clear about the potential implications of the test case when they chose to settle.
    • that insurers should have considered and documented their stance on deductions from claims payments where policyholders received Government support .
    • that insurers should assess all potentially affected complaints, including those they did not fully uphold, unless properly settled on a full and final settlement basis.
    • that insurers should already have provided an initial update on the implications of the judgment.
    • that FCA will be sending firms a new data request.
    • that firms should consider the significant costs involved in any further litigation.
    • that the judgments may provide helpful guidance in interpreting other policies, not least in relation to the interpretation of terms such as “event”, “occurrence” and “incident”, as well as the implications of the Supreme Court overturning the Orient Express case.
      The FCA also published a table setting out the outcome of the test case and key paragraphs of the judgment.
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