FCA Takes The Lead ' Fenchurch Law Covid-19 Business Interruption Briefing Note

• Published date: 27 May 2021
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Coronavirus (COVID-19), Insurance Laws and Products, Arbitration & Dispute Resolution, Insurance Claims
• Law Firm: Fenchurch Law
• Author: Mr Aaron Le Marquer

Since the designation of COVID-19 as a notifiable disease in England on 5 March, and the subsequent ratcheting of measures to slow the spread of the disease, business owners large and small have incurred catastrophic losses which, for the time being, continue to mount up on a daily basis.

Those with business interruption insurance have turned to their insurers for assistance, but have by and large been met with outright rejection of their claims.

Matters have escalated rapidly in the course of the last two weeks as thousands of declined claims pile up, with action groups being formed, 'class actions' announced, and regulators adopting an increasingly interventionist stance, culminating with the FCA's announcement on 1 May 2020 that it intends to take legal action to obtain a court declaration on the disputed wordings.

This update takes stock of developments so far, considers the positions of the market and policyholders in relation to the disputed issues emerging, and sets out the options for policyholders wishing to pursue their declined business interruption claims.

What is the market's position on COVID BI Claims?

ABI

As the representative body of insurers in the UK, the ABI has unsurprisingly sought to manage the expectations of policyholders and government as to the extent to which the insurance market can be expected to shoulder a share of the burden currently being suffered by the nation, stating that 'no country in the world is able to provide widespread pandemic insurance, and the UK is no exception', 'only a very small number of businesses choose to buy any form of cover that includes business interruption due to a notifiable or infectious disease', and 'such policies often only apply when the disease is present at the premises.'

Insurers

Some insurers have taken an even more extreme approach than the ABI, announcing that '[our] policies do not provide cover for business interruption as a result of the general measures taken by the UK government in response to a pandemic', and 'these extensions are intended to cover danger and disturbance and are not expected to cover a pandemic (or similar) breakout of disease.'¹

This has been reflected in insurers' responses to claims notified, which have largely been to issue blanket declinatures using cut-and-paste standard responses, often with no apparent consideration of the facts of the claim submitted.

FCA

Unlike the steps being taken by regulators in some other markets, notably some US states, there has been no attempt by the FCA to mandate retrospective coverage for COVID-19 losses on existing policies. Taking a relatively measured approach, the FCA wrote a 'Dear CEO' letter to CEOs of London market insurers on 15 April 2020, specifically in relation to SME BI insurance, acknowledging that many policyholders would have no cover, but noting that some policies do give rise to a clear obligation to pay...