Updated 18th June 2020
Summary of Financial Conduct Authority Business Interruption Test Case
On 1st May 2020 the Financial Conduct Authority (‘FCA’) announced its intention to seek a court declaration through the UK High Court to obtain clarity on so-called ‘non-damage’ business interruption insurance policies. The aim is to resolve key contractual uncertainties and give clarity to businesses that are facing uncertainty on their claims in relation to Covid-19.
The FCA confirmed on 10th June 2020 that it has identified a sample of 19 policy wordings to be used in the test case.
The FCA has asked eight separate insurers that underwrite policies in the representative sample to participate in the UK High Court test case. Although AXIS has not been selected as part of the UK High Court test case, in early July 2020 it is anticipated that the FCA will release a comprehensive list of other insurers and other business interruption policies in the market that they expect the test case to affect. The FCA has re-affirmed its view that most small and medium-sized enterprise insurance policies are focused on property damage (and only have basic cover for BI business interruption (BI) as a consequence of property damage) so, in the majority of cases, insurers are not obliged to pay out in relation to the coronavirus pandemic. The test case is focused on the remainder policies that could be argued to include cover.
Following the anticipated early July announcement from the FCA, we will communicate with our customers as to how the test case may impact their claim.
What happens now?
On the 17th June 2020 the FCA released its finalised Guidance on the Business Interruption Insurance test case and has asked insurers like AXIS to review their ‘non-damage’ business interruption policies and see if they may be impacted by the test case. This process is to be completed no later than 8th July 2020.
At the end of this review, AXIS will write to policyholders who have made claims and / or a complaint on their ‘non-damage’ business interruption policy explaining whether it may be impacted by the test case, and if so, what implications this may have on their claim.
That communication will be sent to policyholders by 15th July 2020.
AXIS will update this webpage explaining progress of the test case and potential implications that arise from it.
What are the expected Timelines?
The FCA has given the principal next steps and timelines for how it envisages the test case to proceed below.
|9 June 2020||FCA filed claim form and particulars|
|c.11 June 2020||Case management conference, at which the court will be invited to fix the timetable for the case|
|23 June 2020||Insurers file Defences|
|c.26 June 2020||Further case management conference|
|3 July 2020||FCA files Reply|
|first half July 2020||Skeleton arguments and replies served|
|second half July 2020||5-10 day court hearing|
If you would like further information on the FCA test case, the FCA has a website which you may find useful:
Policyholders can also sign up to receive email updates on business interruption insurance and the UK High Court test case by clicking the hyperlink above.
Policyholders can also be provided with further information on the Financial Ombudsman Service.
Who to Contact?
If you have any questions, in the first instance, please contact the broker or the firm that arranged the insurance for you. These details should be provided on your policy documentation.
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