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FCA seeks Court rulings on COVID-19 coverage under industry Business Interruption insurance wordings

3 June 2015

On Friday 1 May, the FCA announced stating that it intends to seek legal clarity on BI insurance.

The FCA wants to obtain declaratory rulings from the courts on whether or not claims are payable under certain BI policy wordings. The announcement states that the FCA is working to identify a sample of cases representative of the most frequently used wordings that are giving rise to uncertainty and these would be the subject of the declarations. The FCA is writing to some firms, asking them to clarify whether their policy wordings cover BI losses arising from Covid-19.

The FCA intends to make agreed applications to the Court, with insurers. It is therefore clear that, while the FCA is expecting to invite insurers to join the applications, it is not seeking to force insurers to take action, nor is it seeking to enforce a position on insurers in place of the Court or usual disputes process.

As the rulings which the FCA obtains would be on specific clauses of certain policies, we consider it very unlikely that the conclusion of the FCA’s action would be that all BI claims have to be paid, regardless of the terms of the policy. It seems to us that the FCA is seeking to ensure that the rule of law is upheld, and that policy coverage does not become a political question.

Notwithstanding this, firms should consider, in light of relevant parts of the FCA Handbook and public mood, whether they should decline to take part, even if they have the ability to do so.

The FCA’s announcement, which is available here:… also contained draft guidance on the FCA’s expectations for insurers and intermediaries to consider the value of their products in light of Covid-19, and on the FCA’s expectations for insurers and intermediaries when dealing with customers who may be experiencing temporary financial difficulty as a result of Covid-19.

If you have received a letter from the FCA and/or are considering the implications of its action or guidance, please get in touch with William Reddie, who have been looking in detail at this announcement and guidance, and its consequences.