Coronavirus: Financial Conduct Authority to seek legal clarity on business interruption insurance

Move by financial regulator should help pubs, says trade group


THE Financial Conduct Authority (FCA) intends to seek legal clarity on business interruption insurance in a bid to resolve uncertainty over claims for businesses affected by the coronavirus pandemic.

The financial regulator said it is seeking to bring to court what it considers the “key relevant cases which provide the greatest clarity on specific policy clauses” as soon as possible to gain an independent view on disputed business interruption insurance policies. The FCA said it will seek to put cases before the court “on an agreed basis with the insurers concerned in order to get the fastest possible judgement”; it is writing to a “small number of firms” seeking clarification over whether they are declining, or intend to decline, business interruption claims and said it expects them to reply by May 15, when it will then “consider which firms to ask to join the court process”.

The move comes after a British Beer & Pub Association (BBPA) survey of its members showed 56% of business interruption applications have been rejected; trade group the BII said just 3% of pub businesses had been successful in receiving a business interruption insurance claim; and the Night Time Industries Association confirmed its intention to take legal action against Hiscox Insurance for refusing what the group describes as “legitimate insurance claims” under from its members.

Christopher Woolard, interim chief executive of the FCA, said: “We have been clear that we believe in the majority of cases business interruption insurance was not purchased to, and is unlikely to, cover the current emergency.

“However, there remain a number of policies where it is clear that the firm has an obligation to pay out on a policy. For these policies, it is important that claims are assessed and settled quickly. There are also some other policies where firms may consider there is no doubt about wording and decline to pay a claim, but customers may still consider there is genuine uncertainty about whether their policy provides cover.

“Our intended court action is designed to resolve a selected number of key issues causing uncertainty as promptly as possible and to provide greater clarity for all parties, both insured and insurers.

“It is clear that decisive action is appropriate given the severity of the potential consequences for customers.”

The move by the FCA was welcomed by the BBPA, which said there have been “widespread concerns” over business interruption claims.

“There has been a severe lack of clarity for pubs on business interruption insurance claims,” said BBPA chief executive Emma McClarkin.

“This had added to the terrible uncertainty our sector faces in what is already a very precarious situation.

“It is simply not right that 56% of pub business interruption claims have been rejected, whilst 44% still await an outcome.

“We hope the FCA announcement will help resolve some of the uncertainty our sector faces on its insurance cover.”