FCA send insurers letter after Business Interruption Ruling

FCA send insurers letter after Business Interruption Ruling

FCA send insurers “Dear CEO” letter after Business Interruption Ruling

The FCA details what they expect the next steps for insurers and policyholders to be, while encouraging insurers to settle claims quickly.

The FCA has written to insurers after a landmark business interruption test case was handed down in favour of policyholders.  Last month, the High Court ruled that the majority of businesses that had been told to close due to COVID-19 were protected by their business interruption policies. Many UK businesses had been refused payouts in March and April.

Now, the FCA, who is the regulator for all UK insurers, has written a “Dear CEO” letter to thank the eight insurance firms for co-operating and ensuring a clear outcome as quickly as possible. They have also detailed the next steps to maintain this pace in settling insurance claims for struggling UK businesses.

In the letter, they focus on issues around claims handling, communication with policyholders, providing the FCA with information on affected policies, and information around Government support.

The letter is a follow up to an April “Dear CEO” letter which suggested that there were policies that businesses had where the insurer had an obligation to pay out. They outlined their expectations that insurers should “consider very carefully the needs of their customers and show flexibility in their treatment of them”.  The FCA later brought the issue to the High Court for more clarity on the business interruption policies and their coverage.


What have the FCA said to insurers?

In what can be seen as a slap on the wrist to insurers who have caused this dispute, the FCA want firms to start being more transparent with policyholders in what is often an extremely convoluted area of insurance.  The FCA stated:

We expect all insurers to take a pragmatic, transparent and consistent approach to their interactions with policyholders over any remaining evidence that applies to individual claims, rather than these creating additional barriers or delays to paying valid claims.

In relation to ongoing and past claims, the FCA has advised that insurers should consider the steps they take to now progress claims of the type that the judgment says should be paid, irrespective of any possible appeals.

The FCA did state that the firms should analyse the scope of any potential appeal, though did include that some policy wordings may not be subject to an appeal at all.  They stated:

Where insurers have policy wordings which were:

• affected by the test case, but

• where the relevant questions in the test case are not subject to any appeal,

            then they should[…] reassess all potentially affected claims/complaints.


Businesses will be contacted by insurers

The FCA is also encouraging insurance firms to contact any affected policyholders as soon as possible. Under their guidance, firms should in the very least already have provided an initial update on the implications of the judgment.

The FCA did, however, understand that communication with policyholders who have different policies, whilst there is room for an appeal, might be a little tricky. They stated:

We know the level of detail that insurers can provide at this stage, when the scope of any appeal is known, and how quickly they can communicate the full implications for each policyholder will depend on their particular policy wordings and the implications of the judgment for those wordings.

We expect insurers to provide the clearest information that they are able to at the earliest opportunity.

We would advise any business who had a business interruption claim turned down earlier this year and who has not heard back from their insurer recently to get in touch as soon as possible and ask for an update.


How can you claim business interruption compensation?

Claiming business interruption compensation through business insurance could be the only hope of survival for many UK business owners. Having said this, the wording of the insurance policies is often very complex and sometimes unique to each business.

If you believe you are entitled to business interruption compensation and your insurer isn’t paying out, our expert solicitors are able to go through your policy carefully to determine whether you may be able to claim.

If we believe you are eligible and your insurer disagrees, our team can calculate your potential losses and challenge the insurer for you. Our expertise with working with insurance companies, the FCA and the FSCS means that we can present your claim in a way that is dealt with promptly and efficiently.

Our legal team come from a financial services and compliance background. We are regulated and authorised by the Solicitors Regulation. 

If you would like to speak to one of our Business Interruption Claim Solicitors, you can do by calling 0800 046 9976, or by completing an enquiry form.

You can also contact Smooth Commercial Law Directors via email:

Scott Birchall - sb@smooth-commercial-law.co.uk

Paul McKittrick - paul.mckittrick@smoothlaw.co.uk

You can read the full “Dear CEO” letter with added guidance for insurers here (PDF).

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.