Business interruption insurance

The coronavirus (Covid-19) pandemic has led to widespread disruption and business closures resulting in substantial financial loss. Many customers have made claims for these losses under their BI insurance policies. There has been widespread concern about the lack of clarity and certainty for some customers making these claims, and the basis on which some firms are making decisions in relation to claims.

The issues surrounding BI policies are complex and have the potential to create ongoing uncertainty for both customers and firms. The variation in the types of cover provided and wordings used mean it can be difficult to determine whether customers have cover and can make a valid claim. There are genuine doubts over the appropriate interpretation of the wording in some cases. This has led to uncertainty and disputes, with many customers who believe they have valid claims having these rejected by their insurer.

We believe the circumstances of the current coronavirus emergency, and its effect on businesses holding BI policies means this uncertainty needs to be resolved as quickly as possible. So we are setting out our actions so far and how we intend to engage with policyholders and insurance intermediaries throughout the test case process.

What we’ve done

On 19 March 2020, we set out our expectations for insurance firms. This outlined our expectation that firms should consider very carefully the needs of their customers and show flexibility in their treatment of them.

On 15 April 2020, we wrote to all chief executives of insurance firms. This Dear CEO letter outlined our expectations of firms with regard to the settlement of BI claims and the need to assess and settle claims quickly.

On 1 May 2020, our statement set out our intention to obtain court declarations aimed at resolving the contractual uncertainty around the validity of many BI claims. We explained we are intending to take this action in the public interest to advance our consumer protection and market integrity objectives, with the aim of obtaining legal guidance more quickly and at lower cost to policyholders than would be the case if they took their own actions.

Alongside our statement on 1 May we asked insurance companies for information on their BI policies and wordings, and their intentions and decisions in relation to claims on these policies (by 15 May). We are using this information to consider, with external counsel, which policies we will seek to achieve a declaratory judgement on through the courts. We want a representative sample of wordings to give as much clarity as possible, whilst recognising that the need for an expedited court process means we can’t achieve clarity on every different wording. We are not yet in a position to definitively identify which policy wordings, or indeed firms, may be included in proceedings.

We want your views

The coronavirus pandemic will have affected policyholders in many different ways. The issues relevant to the intended proceedings will be wide-ranging and complex. We recognise we will better achieve our consumer protection and market integrity objectives if the proceedings cover as broad a cross section of policies and issues as is compatible with an expedited court process. We are reviewing extensive material provided by insurers with the aim of delivering on that objective.

So, we are inviting policyholders of BI insurance who are in dispute with their insurers over the terms of their policies to engage with us, should you wish us to take these arguments into account as part of the test case. In particular, we ask that you send us:

• your (or your representative’s) arguments as to why you consider cover should be available in cases where you consider your insurers have not responded appropriately to a claim;
• the wording of the policy that has not responded; and
• brief relevant facts of the case.

We need policyholders’ arguments now as we intend to seek the court’s view on relevant policies as soon as possible, and we will consider all arguments and information you raise to us by Wednesday 20 May 2020. Where you are a member of an action group pursuing action against an insurer or of a relevant trade body, please could you also identify this clearly in your correspondence.

Please email: [email protected]  

We will contact you if we have any queries in relation to the information submitted and will consider all arguments raised, but we will not be able to respond individually to all emails sent to this email address.

We will provide email updates to policyholders who sign up for these via the link below.

High Court test case and policyholder engagement

The High Court test case is not intended to encompass all possible disputes, but to resolve some key contractual uncertainties to provide clarity for policyholders and insurers. It will not determine how much is payable under individual policies, but will provide the basis for doing so.

We have now developed a Policyholder Engagement Statement for policyholders and insurance intermediaries which sets out our approach to the High Court test case for BI insurance policies, with the key points as follows:  

• The FCA will put forward policyholders’ arguments to their best advantage where claims have been rejected and the usual channels of claims settlements have reached an impasse.
• The intended action will not prevent individuals from pursuing issues through negotiated settlement, arbitration, court proceedings as a private party, or taking eligible complaints to the Financial Ombudsman Service.
• We wish to ensure that policyholders and insurance intermediaries are properly engaged throughout the test case process. 
• We are inviting policyholders and insurance intermediaries who are aware of unresolved disputes with insurers over the terms of BI policies to email arguments they wish us to consider as part of the test case (with the associated policy and brief factual circumstances) to [email protected] by Wednesday 20 May.
• We will treat this information as confidential and covered by the FCA’s litigation privilege.
• We will use the arguments, policies and fact patterns put forward by policyholders to inform the sample of policy wordings and fact patterns to be used in the court proceedings.
• We expect to make public all the 'pleadings' in the test case, and will update this webpage regularly and be available for discussion with action groups and policyholders and their legal representatives.
• 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. It will also provide persuasive guidance for the interpretation of similar policy wordings and claims, that will be able to be taken into account in other court cases, by the Financial Ombudsman Service and by the FCA in looking at whether insurers are handling claims fairly.

Sign up for BI insurance updates 

Policyholders can sign up to receive email updates on BI insurance and the High Court test case.