High court rules in favour of policyholders in insurance test case

High court rules in favour of policyholders in insurance test case”

The UK's insurance watchdog, the Financial Conduct Authority (FCA), has won its business interruption test case, which will force some insurers to pay for lockdown claims - and South African policyholders are now hoping that it will set a precedent for local courts as well.

Christopher Woolard, interim chief executive of the FCA, said the ruling removed "a large number" of roadblocks to successful claims, as well as clarifying those that might not be successful.

'We are pleased that the Court has substantially found in favour of the arguments we presented on the majority of the key issues.

"Today's judgement is a significant step in resolving the uncertainty being faced by policyholders".

Huw Evans, director general of the Association of British Insurers, said: "Insurers have supported this fast-track court process led by the FCA to help bring clarity for customers and we welcome the speed with which the court has delivered a ruling".

The FCA said the Government's coronavirus public health controls had caused "substantial loss and distress to businesses", particularly small and medium enterprises. "Policyholders would ultimately receive the money they are holding out for, and insurers could be forced to review previously rejected cases to settle those claims, because the FCA expects the judgment to be applied and re-applied to outstanding or rejected claims".

While the ruling has been described as a win for policyholders, it does not mark the end of the battle, with insurers expected to now appeal the judgement.

"We brought what we think are the strongest cases", said Ms Robinson, adding that in all those cases the underwriter is a firm called Specialist Underwriting Services.

On Tuesday, the United Kingdom court found in favour of the FCA on most key issues, such as whether Covid-19 triggered business interruption cover.

Small businesses that bought policies from insurers specifically against disease celebrated today now that the High Court has sided with them.

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But it could apply much more broadly across the industry and also influence courts elsewhere around the world, so has clear ramifications for the insurance, reinsurance and potentially also the insurance-linked securities (ILS) sectors.

Woolard said: 'We brought the test case in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims and the wider market.

However, the 150-page judgment says that "most, but not all, of the disease clauses in the sample provide cover" and "certain denial of access clauses" but those affected will hear from their insurers in the next seven days.

But the High Court has ruled that insurers are liable to pay out in the majority of 21 different types of policy wording judges considered.

You can see the full details of the judgement here and below is a statement from the FCA. It enabled them to benefit from the expert legal team assembled by the FCA, providing a comparatively quick and cost-effective solution to the legal uncertainty in the business interruption insurance market.

It is possible that the judgment will be appealed.

Australian-based QBE said it was considering its options to appeal the ruling, saying the decision overall was still largely in its favour.

It is important that policyholders, action groups, insurance intermediaries and their legal representatives are properly engaged throughout the test case process.

Hiscox, which before the case was already facing the threat of legal action from the Hiscox Action Group, made up of hundreds of its United Kingdom business clients who dispute the insurers refusal of their business interruption claims, was one of seven insurers involved.

Law firm Mishcon de Reya, which is now representing the Hiscox Action Group in an arbitration claim against Hiscox for non-payment of business interruption insurance, has described the case as a "resounding victory".

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