The Financial Conduct Authority (FCA) plans to seek a court declaration to resolve contractual uncertainty in business interruption insurance cover.
The announcement came as two groups representing some 500 businesses that have insurance policies with Hiscox joined forces to pursue legal action against the insurer in a row over coronavirus payouts.
“We are intending to take this action in the public interest to advance our consumer protection and market integrity objectives,” the FCA explained in a statement. “We believe the circumstances of the current coronavirus (Covid-19) emergency, and its effect on businesses holding business interruption policies means that any uncertainty needs to be resolved as quickly as possible.”
The action, to head to court “in an agreed and urgent manner”, is intended to “resolve some key contractual uncertainties” arising from whether standard business interruption policies cover coronavirus claims. It will not encompass all possible disputes, nor determine how much is payable under individual policies, but on this latter point, “will provide the basis for doing so”. The FCA added that the action will not prevent individuals from pursuing issues through the courts, or taking eligible complaints to the Financial Ombudsman.
The FCA is pulling together a sample of cases representative of all the most frequently used policy wordings that are giving rise to uncertainty, and is consultation with “small number of relevant firms” and the Association of British Insurers (ABI).
These firms have until 15 May to tell the FCA whether they believe that their policy wordings for business interruption losses arising other than from property damage provide cover.
Christopher Woolard, interim chief executive of the FCA, wrote to the heads of UK insurers in April and conceded that most basic business interruption policies do not cover pandemics, although he urged insurers to pay out for claims arising from Covid-19 when they are able to do so.
Commenting on the action, Woolard said: “We ha