FCA to obtain court declaration to resolve contractual uncertainty in BI insurance cover

The announcement is a result of concerns around the lack of clarity for some customers making business interruption claims and the basis on which some firms are making decisions in relation to claims

01 May 2020

This article was written by Anna Davis.

As stated in its Dear CEO letter of 15 April, the FCA’s view is that 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 unlikely to be obliged to pay out in relation to the coronavirus pandemic.

Some policies also cover for BI from other causes (for example in relation to infectious/notifiable diseases, non-damage denial of access and public authority closures/restrictions) and may in some cases provide cover. The FCA consider that whether there is cover for the business interruption related to the pandemic crisis will depend on a number of factors, including the policy’s wording. The range of wordings and types of coverage are sufficiently broad in the BI market that it is difficult to determine at a general level the degree to which any one individual customer may be able to claim.

There are BI policies where firms have determined an obligation to pay out on a policy. In relation to other policies however, 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.

To help with this uncertainty the FCA will seek to bring a case to court as soon as possible for an authoritative declaratory judgment regarding the meaning and effect of some BI insurance policy wordings where there remains unresolved uncertainty. The FCA will identify a sample of cases representative of all the most frequently used policy wordings that are giving rise to uncertainty.

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