Watchdog prepares legal action against insurers over Covid payouts

Linda J. Dodson

The industry already expects to pay out £900m in business interruption claims, according to the Association of British Insurers, meaning losses could run to billions depending on the outcome of the test case being brought by the FCA. 

The FCA’s action was welcomed by business groups whose members are facing a cash crunch due to the slump in economic activity and forced closure of swathes of the economy. 

Kate Nicholls, chief executive of industry group UKHospitality, said: “It is time that insurers played fair and stopped hiding behind technicalities.

“We are delighted to see that the FCA has taken on board the legitimate claims of hospitality companies in its challenge to insurers.

“These businesses have been hit hard by the coronavirus and had expected their insurance policies to cover them for forced closures.” 

Mike Cherry, of the Federation of Small Businesses, said the case could give legal clarity to small firms that had bought cover in good faith and feel unfairly treated. 

Arch, Argenta, Ecclesiastical, MS Amlin and QBE are the other insurers expected to participate directly in the court case. 

While only eight insurers will be represented in court, the FCA said it will ask judges to consider 17 policy wordings sold by 16 insurers, also including Allianz, AIG, Aviva and Axa. 

The sample policies were selected following a review of more than 500 contracts submitted by 40 insurers, the FCA said. 

The regulator told other insurers to check their policy wordings against those being sent to court to assess if they will be affected by the rulings. 

The FCA intends to file its claim in court by June 9 ahead of a court hearing in the second half of July, which could last two weeks. 

The watchdog warned businesses that just because their insurer or policy wording has been included in the legal action does not mean they will necessarily be entitled to a payout. 

Regulators repeated their view that the pandemic has not triggered valid claims under most business interruption policies. These are typically designed to provide cover for lost trade if a firm is forced to close by problems such as flooding, and are not intended to insure against a shutdown triggered by state decree.

 The test case is intended to resolve uncertainty over the smaller number of cases where the wording is unclear. 

Source Article

Next Post

Twitter Had Been Drawing a Line for Months When Trump Crossed It

OAKLAND, Calif. — Jack Dorsey was up late Thursday at his home in San Francisco talking online with his executives when their conversation was interrupted: President Trump had just posted another inflammatory message on Twitter. Tensions between Twitter, where Mr. Dorsey is chief executive, and Mr. Trump had been running […]