Since the start of the Covid-19 outbreak there has been a lot of conflicting information and news about whether or not a commercial insurance policy will provide business interruption cover for pandemics. We, at GS Group, have been monitoring the news and constantly reviewing the information available to ensure we keep our clients informed based on the facts and ongoing developments.
Insurance, at its most basic, is designed so the losses of the few are paid for by the premiums of the many. Obviously, for a pandemic, this situation does not apply as most, if not all, businesses have been financially affected by the current crisis. This has caused a major issue for insurers who may be facing a large number of claims from clients, but, as your broker, our role is to protect your interest and ensure claims are paid where the cover exists.
At present there are three main categories which an insurance policy can fall in to; those which provide cover, those which don’t provide cover and those where cover may exist subject to interpretation. There are very few policy wordings which fall in to the first category where cover definitely is provided, where this is the case your insurer will be dealing with your claim. In the second category, there are policies which provide cover for infectious diseases but only those listed in the policy and in these circumstances the policy will not provide cover. It is the last category, where the wording is ambiguous, that is the subject of a lot of media attention and we are working with others to resolve this.
The Financial Conduct Authority has carried out an in-depth consultation with all relevant stakeholders and have identified 17 business interruption policy wordings they wish to challenge. They are asking for a judicial review of these policies looking for the Courts to provide a legal definition of what is meant in each case. These definitions will then be used to settle the question of whether the ambiguous policy wordings provide cover for the current Covid-19 pandemic or not.
The case in the High Court is due to proceed in the second half of July. The Court’s decision will be binding on those participating in the litigation and may be persuasive when Courts are considering cases with the same or similar policy wording. The FCA’s hope is that it will result in early resolution of disputes and that claims will either be paid or policyholders can obtain clearer advice based on the decision taken by the Court.
GS Group are involved in this process and will be keeping a watching brief on the developments of this case. Once the Court has made its decision we will then be able to better advise clients of their prospects of success in making a business interruption claim on their policy.
Regardless of the outcome of the litigation, each claim intimated to insurers under a BI policy will still need to be looked at individually and on its own merits. In bringing these cases, the FCA is highlighting that it is by no means a foregone conclusion that insurers are entitled to decline cover. Any business which thinks it may fall into the“maybe” category should carefully consider its position.
Your Claims Team and Account Executives will be on hand to discuss any specific queries you may have whilst we await the outcome of the test case.