Coronavirus: FCA issues statement about business interruption insurance

Many businesses are facing continuing uncertainty as to whether their insurers will meet business interruption (BI) claims arising from the pandemic.

12 May 2020

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Many businesses are facing continuing uncertainty as to whether their insurers will meet business interruption (BI) claims arising from the pandemic.

In order to address some of these concerns, on 1 May 2020, the Financial Conduct Authority (FCA) published a statement about BI insurance cover and COVID-19, announcing that it intends to obtain a court declaration to resolve the uncertainty around the wording of BI policies.

The FCA is concerned about the lack of clarity and certainty for some customers making BI claims, and the basis on which insurance firms are rejecting claims. The FCA's court action intends to resolve key contractual uncertainties. The FCA will seek an authoritative declaratory judgment about the meaning and effect of some BI insurance policy wordings where the wording remains uncertain.

If the FCA obtains a declaratory judgment, the Financial Ombudsman Service (FOS) will be able to take it into account when considering relevant complaints from customers.

The statement goes on to provide details about the FCA's general expectations of insurance firms, including:

  • They are required to communicate clearly and sympathetically to their customers at all times.
  • They must look after customers’ interests when establishing the amount due to be paid to customers where there are valid claims. In some cases, it will be possible to make interim or partial payments while discussions around the final value of the claims remain ongoing.
  • Firms should communicate their approach and decisions clearly to their customers and promptly investigate any complaints that they receive.

Interestingly, the FCA statement also covered the issue of mis-selling of insurance policies. In some cases where there is no cover provided under the policy, there may be a gap between the insurance firms’ and customers’ understanding of what they thought was covered by the policy. If the BI cover provided is not consistent with what the customer requested or instructed, or with what the customer was informed was being provided, then customers may raise these concerns as a complaint with their insurer or intermediary. Some customers may believe they have been mis-sold their BI policy by their insurer or intermediary. Where this is the case, customers can make a complaint if they are not satisfied with the product they have purchased or the outcome of their claim, and if they remain unsatisfied they can take their complaint to the Financial Ombudsman Service.

Contact us...

If you require any legal advice regarding claims involving BI insurance, including claims for mis-selling, please contact Gordon Deane.

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