The FCA’s test case is likely to be the quickest route to clarity on whether losses caused by Covid-19 are covered by Business Interruption insurance. Most SME insurance policies are focused on property damage (and only have basic cover for BI as a consequence of property damage) so, at least in the majority of cases, insurers are not obliged to pay out in relation to the coronavirus pandemic. This case is focused on the remainder of policies that could be argued to include cover.
Given the complexity of business interruption claims and the legal uncertainty surrounding their enforcement (the FCA have issued a test case recently in the High Court), it is is essential that you seek expert legal advice early in order to prepare your Business Interruption Insurance claim.
What outcome are the FCA seeking?
The FCA aims to achieve clarity for all concerned in an unprecedented situation. To do this, the FCA are taking a representative sample of cases to court. High Court judgment is being sought that will help policyholders and insurers have a much clearer view of which business interruption policies respond to the pandemic, and those that don’t. Therefore, the court may well decide a number of these policies respond to the pandemic and others do not.
Which insurer’s will have their policy wordings examined by the court?
The following 16 insurers use at least one of the policy wordings in the FCA’s representative sample which will be examined in the test case:
- Allianz Insurance plc (part of Allianz SE)
- American International Group UK Limited (part of American International Group, Inc.)
- Arch Insurance (UK) Limited (part of Arch Capital Group Limited)
- Argenta Syndicate Management Limited (part of Hannover Re)
- Aspen Insurance UK Limited (part of Aspen Insurance Holdings Limited)
- Aviva Insurance Limited (part of Aviva plc)
- Axa Insurance UK plc (part of AXA SA)
- Chubb European Group SE (part of Chubb Limited)
- Ecclesiastical Insurance Office plc
- Hiscox Insurance Company Limited (part of Hiscox Limited)
- Liberty Mutual Insurance Europe SE (part of Liberty Mutual Group)
- MS Amlin Underwriting Limited (part of MS&AD Insurance Group Holdings, Inc.)
- Protector Insurance UK (part of Protector Forsikring ASA)
- QBE UK Ltd (part of QBE Insurance Group Limited)
- Royal & Sun Alliance Insurance plc (part of RSA Insurance Group plc)
- Zurich Insurance plc (part of Zurich Insurance Group Limited)
The wordings that they use are set out in this list.
How will any judgment affect insurers who are not participating in the test case?
Given the representative nature of the policies and wordings, the test case is expected to provide guidance for the interpretation of many other BI policies that are not in the representative sample.
This means that other insurers will also be affected by the test case and its conclusions. In early July, the FCA expects to publish a comprehensive list of other insurers and many other Business Interruption insurance policies in the market that the test case is likely to affect.
When will the test case be decided?
The directions are expedited, and a 5-10 day court hearing is listed to be heard in the second half of July.
Is my business entitled to Business Interruption insurance?
Specific advice can only be provided by this firm once we have been instructed to review your insurance coverage and other supporting documents. However, the FCA believe that insurers should be liable for paying out for business interruption claims related to the coronavirus pandemic and the subsequent government lockdown restrictions placed on UK businesses.
Most SME insurance policies are focused on property damage (and only have basic cover for BI as a consequence of property damage) so, at least in the majority of cases, insurers are not obliged to pay out in relation to the coronavirus pandemic.
However, for the remainder of policies that could be argued to include cover. There are policies where it is clear that the insurer has an obligation to pay out on a policy. For these policies, it is incumbent on the insurer to assess and settle these claims quickly. Financial pressures on policyholders should not be exacerbated by slow payment, rather, such claims should be paid as soon as possible.
Download the Business Interruption Insurance test case Claim Form
Download the Business Interruption Insurance test case Particulars of Claim
Why use a Specialist Business Interruption Insurance Claim Solicitor?
We work to achieve our client’s interests by attempting to negotiate with the insurers wherever proper and commercially sensible to do so. When the time comes to issue legal proceedings we know how best to do so. If a without prejudice settlement approach is unsuccessful we seek on behalf of our client both litigation funding and after the event insurance policies and prepare and issue a claim without delay. Members of our legal team are also insolvency and winding up petition experts so if our clients face winding up proceedings or appointment of receivers as a result of a invalid denial of insurance coverage we can quickly assist and advise in these areas.
Our Business Interruption Insurance Lawyers get the best results
We endeavour to make the process as stress-free as possible for our clients and seek to eliminate the possibility of business or litigation failure. We know that each client’s case and business is unique, therefore we adopt a bespoke approach tailored to suit the client’s circumstances. We provide specialist senior legal advice from solicitors and barristers (including at QC level) at the outset when it absolutely matters in choosing the best strategy to follow. We are regularly instructed by regional solicitors’ firms to give specialist litigation advice and support in litigation cases. We assist by:
- Issuing legal proceedings & drafting documents/pleadings to support the insurance claim;
- Assisting you in preparation of evidence to support your Business Interruption insurance claim case;
- Appointing the right insurance experts to ensure the best chance of success in litigation;
- Appointing forensic accountants to assess and report on the refunds and consequential losses due;
- Liaising with the bank and the Court and/or the Financial Ombudsmen Service;
- Providing first class Court representation and advocacy; and
- Developing (and aiding implementation of) strategies that allow the business to continue.
Please note: Claims Management Companies are regulated by the Ministry of Justice and are not law firms made up of solicitors and barristers. In these cases, they can only complain to the FOS. They cannot issue legal claims nor represent their clients at Court and may lack expertise in this area. You do not need a CMC to assist you and typically they will simply refer your case to a lawyer for a fee (from the lawyer). We do not accept referrals from CMCs.
Business rescue and Insolvency advice
We specialise in Litigation, Winding-up and Insolvency work and as a consequence we are able to add value by our legal services by guiding clients in these areas which are often ancillary to Business Interruption insurance litigation. We can and have helped clients successfully defend winding up petitions brought by their banks and we can challenge the appointments of LPA Receivers, Auctioneers and also advise as to how best businesses can be rescued and turned around and how debts can be written off or restructured.
If your business has already suffered terminal loss due to (either in full or part) a denial of a legitimate coverage claim by your insurer please still contact us. We can provide advice on obtaining an assignment of the right to bring legal proceedings against the insurer from the Administrator or the Trustee in Bankruptcy as appropriate and have experience in doing so.
Instructing our Litigation Lawyers
We ensure that we provide the best possible outcome for our clients by conducting in depth investigation and research into the realistic prospects of a case before selecting the appropriate course of action in order to reduce time and expense. Liability for costs is always an issue in litigation and based on our extensive litigation experience we provide our clients with as much strategic, practical as well as carefully considered legal advice in order to ensure minimum risk in respect of costs. Where appropriate we encourage the use of alternative dispute resolution (such as mediation and without prejudice negotiation) and our lawyer’s negotiation skills are first class. If early settlement at advantageous terms is not possible, we are extremely experienced and capable at navigating our clients through the litigation process.