FCA launch consultation to assist parties in proving presence of coronavirus in business interruption insurance claims

We are launching a short consultation on guidance to help policyholders, insurers and insurance intermediaries judge how the presence of coronavirus (Covid-19) in a particular area may be proved. We are launching this consultation so that we will be in a position to issue it as soon as possible, once we have the judgment of the Supreme Court.

The draft guidance builds on the High Court’s judgment and is intended to ensure that the process of proving the presence of coronavirus is made as simple as possible for eligible policyholders. This will enable them to receive claim payments as early as possible should the Supreme Court uphold the High Court’s decision that relevant policies potentially provide cover in response to the pandemic.

The High Court’s judgment provided authoritative guidance for the interpretation of the circa 700 policy wordings identified as affected by the test case by circa 60 insurers. 12 out of the 21 policy types tested were found to have the potential to provide cover in response to the pandemic, 9 were not.

Some business interruption insurance policies require the policyholder to prove the presence of coronavirus within a particular area around their premises. As part of its decision, the High Court made declarations as to the types of evidence which policyholders can use to prove the presence of coronavirus, and the methodologies which they may use in that process. The guidance explains types of evidence and methodologies which policyholders can use, together with links to further useful information. It also gives the FCA’s views on how insurers should assess that evidence when handling claims fairly, as required by FCA rules.

Aspects of the High Court judgment are under appeal to the Supreme Court, with judgment expected by January 2021. But the declarations of the High Court relating to proving the presence of coronavirus and covered by this draft guidance are not under appeal and not expected to be affected by the judgment of the Supreme Court. By issuing this document, we are not pre-judging the outcome of the appeals to the Supreme Court. Should that outcome affect the draft guidance, we will amend it accordingly.

We are asking for comments on this guidance consultation by 18 January 2021. If we proceed to issue guidance following this consultation, we propose that the guidance would come into effect as soon as it is issued and cease to have effect on 31 December 2021.