FCA seeks court ruling on Covid-19 insurance disputes
Britain's financial regulator said it was seeking an urgent court ruling on disputes between insurers and firms over claims for loss of income due to the coronavirus pandemic.
The Financial Conduct Authority (FCA) on Friday said it wanted clarity on cases where insurers are refusing to pay out even though customers have taken out business interruption policies.
It was bringing “key relevant cases” as soon as possible to get an independent view on the disputed policies “if there remains unresolved uncertainty”.
Though a majority of business interruption insurance policies are unlikely to pay out during a pandemic, there are “widespread concerns” about the lack of clarity on some policies, 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,” said interim FCA chief executive Christopher Woolard.
He added that the court action is intended to resolve key issues as fast as possible in cases “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”.
The cases placed before the court would be chosen as a representative sample of the most frequently used policy wordings that are giving rise to uncertainty, the FCA said.
Pressure is mounting on the insurance industry to treat customers fairly. Bermuda-based Hiscox faces a group action from policyholders over non-payments of claims.
The insurer last week said “a number” of UK policyholders had disputed the application of their policy in relation to business interruption cover.
Its policy documents say it will cover financial losses for businesses which are unable to use their premises following "an occurrence of any human infectious or human contagious disease, an outbreak of which must be notified to the local authority".
However, the company has incurred the wrath of policyholders over a separate clause which says losses would only be covered if an incident within a mile of an insured business meant the government refused access to that firm's premises.
The insurer argues that as Covid-19 is nationwide any claims under this clause are invalid.
Celebrity chef Raymond Blanc has reportedly enlisted lawyers after being denied a payout by Hiscox. More than 130 businesses have joined the 'Hiscox Action Group' to fight the firm and are now preparing to engage lawyers to mount a challenge.
The FCA last week wrote to insurance companies setting out how they should handle business interruption claims and ordering insurers to explain themselves to the regulator if they disagree with its approach.