FCA – British business insurance will be legally binding
LONDON, May 15 – Britain’s Financial Conduct Authority said on Friday that a test case it is bringing to clarify uncertainty over whether small businesses can claim compensation for disruption caused by the coronavirus pandemic would be legally binding.
The regulator turned to the courts after small businesses such as restaurants, cafes and nightclubs said their insurance claims related to the coronavirus pandemic were being denied.
A national lockdown to fight the pandemic has forced many companies to temporarily suspend operations and furlough staff.
The results of the case would also provide “persuasive guidance” for the interpretation of similar policy wordings and claims in other court cases, the FCA said in a statement.
The FCA said there was “continuing and widespread concern about the lack of a positive response of some of those business interruption insurance policies, and the basis on which some insurers are making decisions in relation to claims”.
The FCA said earlier this month it would bring the case and was seeking responses from a “small number of firms” by Friday before deciding which insurers should take part.
Several groups of small businesses have said they were seeking legal guidance over policies issued by top insurers such as AXA, Allianz, Hiscox, RSA , QBE and Zurich.
QBE has said it received a letter from the FCA, while RSA said last week it had not.
Zurich said this week that the FCA had asked for its stance on the topic, while other insurers have not commented.
Insurers have said they aimed to pay valid claims quickly.
Broker Willis Towers Watson estimates UK insured losses for business interruption, together with event cancellation, could total up to $14 billion in relation to the pandemic, depending on policy wordings.
The FCA said it had instructed law firm Herbert Smith Freehills, and invited policyholders to send it details of disputed claims.
The test case is expected to take place in July.
(Reporting by Carolyn Cohn Editing by Maiya Keidan and Louise Heavens)
(c) Copyright Thomson Reuters 2020