Draft guidance: Business interruption insurance test case - proving the presence of coronavirus (Covid-19)

Open consultation
11/12/2020
11/12/2020
Consultation closes
18/01/2021

In this document, we are consulting on draft guidance on how the presence of coronavirus (Covid-19) may be proved, based on the High Court’s judgment and declarations.  

We are asking for your comments on this draft document by 18 January 2021.

We are willing to extend the time for your comments on this draft document to Friday 22 January 2021 but only for matters that are supplemental and arise from the Supreme Court judgment. All other comments should be received by the 18 January 2021 deadline.

Read the draft guidance (PDF)

What we’re proposing 

We are explaining the types of evidence and methodologies which policyholders may use when proving the presence of coronavirus in a particular area around their premises. It will provide clarity for all parties and help to ensure that the process of proving the presence of coronavirus is made as simple as possible for policyholders. This will help enable policyholders 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.

Who this applies to

This draft guidance is for:

  • policyholders
  • insurers (including managing agents at Lloyd’s) 
  • insurance intermediaries.

This document contains draft guidance on firms’ obligations under:

  • the FCA Principles for Businesses (PRIN), in particular Principles 6 and 7 
  • the Insurance Conduct of Business sourcebook (ICOBS), in particular ICOBS 2.2.2R, ICOBS 2.5.-1R and ICOBS 8.1
  • the Dispute Resolution: Complaints sourcebook (DISP), in particular DISP 1.4 and DISP 1.6

Background  

We received many complaints that insurers were taking a narrow view of whether their business interruption (BI) policy wordings, would provide cover in response to coronavirus. Our supervisory work confirmed that insurers were refusing the large majority of these SME BI claims, with genuine debate as to the meaning of some policy wordings. Some policies require the policyholder to prove the presence of coronavirus in a particular area around their premises.

In June, we began a test case in the High Court to provide certainty for all parties. Aspects of the High Court judgment were appealed to the Supreme Court, which delivered its judgment on 15 January 2021.

The declarations of the High Court relating to proving the presence of coronavirus and covered by the draft guidance were not under appeal.

How to respond 

We are asking for comments on this guidance consultation by 18 January 2021.

We are willing to extend the time for your comments on this draft document to Friday 22 January 2021 but only for matters that are supplemental and arise from the Supreme Court judgment. All other comments should be received by the 18 January 2021 deadline.

You can email your response to [email protected] 

Responses to consultations are available for public inspection unless the respondent requests otherwise. We will not regard a standard confidentiality statement in an email message as a request for non-disclosure. We may be asked to disclose a confidential response under the Freedom of Information Act 2000. We may consult you if we receive such a request. Any decision we make not to disclose the response is reviewable by the Information Commissioner and the Information Rights Tribunal.