The coronavirus pandemic has led to widespread disruption with many temporary businesses closures. The variation in the types of insurance cover provided and wordings used means that, in some cases, there are doubts over the appropriate interpretation of the wordings and whether these businesses can claim on their insurance.
The Financial Conduct Authority (FCA) and insurers consider that this uncertainty needs to be resolved as quickly as possible. As such, a test case is being taken to court to be conducted throughout the course of June and July 2020. A key objective in conducting this test case is to obtain court declarations to try and resolve the uncertainty around the validity of many non-damage business interruption (BI) claims.
Non-damage BI is for losses when there is no physical damage to your business premises, and could also cover other exposures that could disrupt your business operations. For example, as in the case of Covid-19, possible closures due to disease in the vicinity of the premises and/or closure due to government or local authority actions. If you have purchased this type of cover, this will usually be shown in your Insurance Policy Schedule (and the policy wording will outline the terms and conditions of the cover you may have).
The result of the test case will be legally binding on the insurers that are parties to the test case in respect of the interpretation of the sample of policy wordings considered by the court. Markel was not chosen to be a party in the test case; however, the result will provide persuasive guidance for the interpretation of similar policy wordings and claims. This guidance can be taken into account in other court cases including in Scotland and Northern Ireland, by the Financial Ombudsman Service and by the FCA in looking at whether insurers are handling claims fairly.
The test case is not intended to encompass all possible disputes, but is meant to resolve some key contractual uncertainties in order to provide clarity for policyholders and insurers. It will not determine how much is payable under individual policies, but it will provide the basis for doing so.
Further information on the test case can be found here. Policyholders with relevant non-damage BI cover may wish to subscribe for email updates from the FCA which can be done on the FCA’s webpage for the test case (via the above link).