The decisive action that the Financial Conduct Authority (FCA) took earlier in the year to bring legal clarity to the legitimacy of the commercial insurance business interruption clauses by selecting eight insurers in a test case at the High Court resulted in the High Court judgment that the wordings in many of the policies examined but not all, did, in fact, validate the insured businesses' claims, bringing hope to an estimated 370,000 policyholders. Both the FCA and six of the insurers filed “leapfrog” appeal application to fast-track to the Supreme Court in the expectation of an appeal by the insurers which was set to be heard by the end of the year.
In a surprising about-face the anticipated appeal to the Supreme Court by the insurers has now been called off by six of the participating insurers RSA, QBE, Hiscox, MS Amlin , Argenta and Arch. The other two insurers, Zurich and Ecclesiastical who were part of the original legal action, had previously announced that they had no need to appeal as the High Court decision had found in their favour. The insurers have indicated that they will start to address the claims of the businesses that fall into the category of a valid claim following the High Court judgment.
Nick McEwen, an associate in the corporation and commercial team, commented “whilst the battle has been won the war is far from over. There is still plenty of mileage for disputing the minutiae relating to the policy wordings against the Court's judgment” he further commented “insurers are well versed in slipping off the hook and the stakes are higher than ever for them considering the volume of claims. There is no comparative disaster in recent modern times that has had such an impact.”
The success or failure of the business interruption claims may still be unpredictable; insured businesses may still face a challenge as the 21 wordings examined by the Court relating to 700 types of policies were not all sanctioned by the judgment and in some instances, for example, the Court felt that where there was partial use of the premises the question of “inability to use” would have to be considered on the basis of the facts of each case. The FCA stated from the onset that the test case was not intended to address all possible disputes, but aimed to resolve some key contractual uncertainties, in particular, ‘causation' issues also to provide clarity for all parties - policyholders and insurers. Individual claims will still have to be subject to discussions between the insurers and businesses.
The FCA has asked the insurers to expedite their claims procedures and to re-visit the rejected applications that many businesses made previously under their business interruption clauses prior to the High Court judgment. There will be a considerable back-log that the insurers will have to work their way through which is likely to compound the fragile position of some the insured businesses that are desperately in need of a financial injection to keep their businesses afloat. The stricter measures the government has introduced in response to the latest rise in transmission of coronavirus in various hot-stops across the country is having a serious impact on industry sectors that are obliged to considerably reduce their capacity to do business or close altogether.
The experienced litigation lawyers in Giambrone's insurance team recommend that all business interruption claims are made after a thorough analysis of their policy and a comprehensive examination of the detail of the High Court judgment related to the wordings to ensure that it complies with the judgment to limit the opportunity for spurious rejection. Giambrone's insurance team is well versed in the tactics employed by some insurers to obscure their liability or expand the time taken to settle.
Originally published by Giambrone, October 2020
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