Business interruption policies written in the UK are predominantly property based. They are designed to pay out in the event that the premises from which the business operates are closed by fire, flood or other damage to the fabric of the building. Some policies also have an extension for closure forced by notifiable diseases, such as Legionnaires disease. However, the precise drafting of the clause is very important. A typical clause might include cover for a notifiable disease by limiting cover to “one of the following specified human infectious or human contagious diseases….” And if Covid-19 is not included in that list, the insurer is likely to say that the policy does not respond to the claim.
Several action groups have embarked on campaigns to put pressure on insurers and have launched claims of their own. The Hiscox Action Group has over 600 members. Many insurance policies provide that a dispute over the insurers decision to decline cover should be referred to arbitration. The Hiscox Action Group’s solicitors, Mischon de Reya, formally commenced its arbitration claim against the insurer on 15 June 2020.
Next month (July 2020) the UK’s financial regulator, the Financial Conduct Authority (FCA)’s test case against insurance companies will be heard by the High Court, to try and resolve the frustrations of many businesses who bought a business interruption insurance policy which has not paid out when they were forced to stop trading due to the Covid-19 lockdown imposed by the Government.
The FCA has asked the court to rule on 17 disputed policy wordings from eight different insurers, including Zurich, Hiscox, and RSA in order to try and establish whether the interruption to business caused by the pandemic is covered. The claim was issued in the High Court on 9 June and the Insurers’ defences are due on 23 June 2020. The claim is listed for an 8 day hearing (which will be live-streamed) on 20-23 July and 27-30 July. The purpose of the claim is to clarify the meaning of certain representative sample policy wordings. The FCA’s claim does not mean that policy holders or action groups are prevented from bringing their own claims, or arbitrations. The FCA’s website contains a list of the insurers and sample policy wordings that are the subject of the court action. A clause that lists the notifiable human diseases that are covered by the policy (and does not include Covid-19), such as in the example above, is one of those included in the test case.
The FCA will publish a list, probably in early July, of all the policies with rejected claims and complaints that it expects insurers to re-assess after the court case.
If your insurer has rejected your claim for business interruption, you should check on the FCA’s website to see whether your insurer and policy wording are included in the FCA claim. Even if they are not, you should still make sure that your insurer reconsiders your claim once the FCA’s claim is concluded at the end of July and the judgment is handed down.
You may want to consider challenging your insurer’s decision to decline cover for a business interruption policy. You will need specialist advice as to whether there is a reasonable prospect of successfully challenging that decision at arbitration or under the Insurance Act 2015. You may want to consider joining an action group and sharing with others the costs and risks of litigation; or making a complaint to the Financial Ombudsman. You do not have to wait for the outcome of the FCA’s case.