FCA Guidance – Proving the presence of Covid-19
- By MICHAEL HANSON
- •
- 06 Jan, 2021
YOUR COMPLIANCE MATTERS: FCA Guidance – Proving the presence of Covid-19
Relevance: High Court declarations made in the Business Interruption test case.
Action required: Awareness of effect on Business Interruption policies.
Most of us will be aware of the High Court’s decision on 15 September 2020 in the Business Interruption test case, which found that the majority of the 21 policy wordings should be interpreted in favour of policyholders. This potentially paved the way for payouts to an estimated 370,000 small businesses forced to close during lockdown.
However, following that decision, the Supreme Court granted permission to the FCA, six defendant insurers and one intervening policyholder action group to appeal the High Court decision.
· The FCA’s appeal is focused on the so-called trends clauses, aspects of the prevention of access wordings, and certain disease wordings where, exceptionally, the High Court limited cover under some policies to local-only outbreaks of Covid-19.
· The insurers’ appeal is also concerned with the disease and prevention of access clauses found in the business interruption sections of policies.
The outcome of the appeal is not expected until January 2021 so in the meantime the FCA has recently issued draft guidance covering: “Business interruption insurance test case - proving the presence of coronavirus (Covid-19)”
The FCA has stated that “The declarations of the High Court relating to proving the presence of Covid-19 and covered by this draft guidance are not under appeal and not expected to be affected by the judgment of the Supreme Court. By issuing this document, we are not pre-judging the outcome of the appeals to the Supreme Court. Should that outcome affect the draft guidance, we will amend it accordingly.”
The Draft Guidance:
· Can be accessed on the FCA website, using the following link:
· Is for policyholders, insurers (including managing agents at Lloyd’s) and insurance intermediaries.
· Demonstrates how the presence of Covid-19 in a particular area may be proved, based on the High Court’s judgment and declarations and in the context of insurers’ obligations under FCA rules to handle claims fairly.
· Explains the types of evidence and methodologies which policyholders may use, together with links to further useful information for policyholders.
The FCA is asking for comments on this guidance consultation by 18 January 2021.
· “If we proceed to issue guidance following this consultation, we propose it would come into effect as soon as it is issued and cease to have effect on 31 December 2021 – we expect that all claims to which the guidance could be relevant would have been resolved by that date.”
It is not our intention to interpret or précis this draft guidance paper; we believe that firms can make their own mind up about the relevance of its content to their business but we will assist firms in this respect, if we are asked.
We will continue to review this matter as developments occur, particularly when the results of the appeal are published, possibly in January 2021 and will advise firms accordingly.
If you need to discuss any aspect of this matter with us, please make contact in the normal way.
