FCA Launches Guidance For Businesses On Evidence Required For Business Interruption Claims

• Published date: 16 December 2020
• Subject Matter: Insurance, Coronavirus (COVID-19), Insurance Laws and Products, Insurance Claims
• Law Firm: Giambrone & Partners
• Author: Mr Nick McEwen

The Supreme Court is still considering the Financial Conduct Authority's (FCA) test case regarding the validity of business interruption insurance policies wordings, with a decision to the crucial issue now promised in the New Year. The FCA clearly recognises that many businesses are suffering severely due to the closure or reduction of their ability to trade due to the coronavirus. The announcement that more areas, including London, are to incorporated into the tier three bracket of restrictions amplifies the urgent need to know whether they can make claim on their commercial insurance policy's business interruption clauses. In order to assist businesses to make their claims, the FCA has produced guidance, based on the initial judgment at the High Court, to bring clarity to all and enable businesses to draft their claims and submit as soon as possible, once the Supreme Court's decision is known.

The High Court provided confident guidance for the interpretation of the approximately 700 policy wordings that were reviewed. It was found that out of the 21 policy types considered, 12 were found to have the potential to provide the cover required under business interruption clauses arising out of the coronavirus pandemic, nine were found not to apply. The Supreme Court is considering some aspects of the High Court decision under the current appeal, the FCA guidance addresses aspects that are not under appeal.

Nick McEwen, as an associate in the corporate and commercial litigation team, explains "the guidance can be relied on immediately as it only provides information on aspects of the FCA test case decision that are not under appeal, so businesses can begin the process for making a claim under the business interruption clauses of their commercial insurance policy." He further commented "the FCA Guidance is welcomed as it provides clarity to businesses and insurers on what evidence should be regarded as acceptable, removing the potential for any delaying tactics on the part of the insurers"

The guidance explains the types of evidence and methodologies which the policyholders can use to support their claim.

A Brief Outline of the Guidance

For Policyholders

Many of the policies require evidence of the presence of the infectious risk, (in this case Covid 19), in the vicinity of the business premises. Policies vary between insurers as to whether they require the presence of the disease within a specified distance, zone or radius from the business premises which...