FCA invites brokers and policyholders to contribute to BI legal declaration process

The FCA is calling on brokers and policyholders who are aware of unresolved business interruption (BI) claim disputes linked to the coronavirus pandemic to submit materials for consideration ahead of its impending legal investigation.

Earlier this month, the regulator confirmed that it intends to seek a court declaration to resolve uncertainty for policyholders making BI claims, as well as clarify the basis on which insurance firms are making decisions to accept claims.

This will involve the FCA bringing to court key relevant cases that provide clarity on specific policy clauses in order to gain an independent view on disputed BI policy wordings – these cases, chosen on an agreed basis with affected insurers, will showcase a representative sample of the most frequently used policy wordings that are leading to confusion and uncertainty.

The FCA stated that the results of the test case “will be legally binding on the insurers that are parties to the test case in respect of the representative sample considered. It will also provide persuasive guidance for the interpretation of similar policy wordings and claims, that can be taken into account in other court cases, by the Financial Ombudsman Service and by the FCA in looking at whether insurers are handling claims fairly”.

Liaising with brokers

The regulator is already working with insurers to gather the required information for the test case, however the FCA has now opened the floor to brokers and policyholders too, recognising that “the intended proceedings will better achieve our consumer protection and market integrity objectives if they cover as broad a cross section of policies and issues as is compatible with an expedited court process”.

With this in mind, the FCA is “inviting policyholders and insurance intermediaries who are aware of unresolved disputes with insurers over the terms of BI policies to engage with us, if they want us to take their concerns into account as part of the test case” – the deadline for these submissions is 20 May 2020.

In particular, the FCA is looking for broker and policyholder arguments as to why they consider cover should be available, together with details of policies they consider have not responded appropriately to a claim.

The FCA has appointed law firm Herbert Smith Freehills, led by Paul Lewis, to handle the test case.