Some comment and analysis from Flaxmans on the FCA Business Interruption case;
The eagerly awaited outcome of the High Court’s judgment in the FCA Test Case has yielded a rich vein of opportunities for clarity and future treatment of BI insurance cover.
For policyholders it makes for much better reading than some commentators had forecast. Clearly, it is not over yet because an Appeal seems inevitable but the FCA has kept its foot on the pedal with insurers and there are signs that the Court and indeed the lawyers are willing to expedite an Appeal to reach more certainty.
It is evident from the judgment that the court has taken the view that the cover for the Peril, as defined, must contemplate ‘what is likely to happen on the discovery of an ‘event’ caused by the Peril, which would directly or indirectly interrupt the business.’ That is an important take away from the trial.
No one expected a pandemic
The Pandemic took the world by surprise. Despite the subject being ‘explored’ countless times in the last hundred years no one believed it could happen in a civilised world; including it seems the WHO.
The insurance industry has failed in the pandemic episode to meet the basic tests of competence and trust. The High court has called it out on its own expertise. Commenting further Roger Flaxman, Chairman of Flaxmans states:
“It should not be forgotten that the coverage disputes arose largely because insurers, collectively, said “we never intended to cover pandemics”. They then set to finding interpretations of their policy wordings to justify their claim; but it is difficult to convincingly justify something that in fact almost no-one had thought about; and certainly, had not expected to happen.”
The overarching outcome of the FCA initiative’s test case is an unprecedented dissection of the ‘meaning’ of the chosen 21 policies, which are estimated to have an impact on over 700 types of policies amongst some 60 insurers affecting some 370,000 policyholders. The judgment, albeit long and complex, is well set out, each insurer’s policies being ‘sliced and diced’ one at a time and in the same comparative sequence in each case. It makes for invaluable reading for insurance professionals interested in the inner workings of insurance as an instrument of indemnity.
Roger Flaxman: “Policyholders just want to know are they covered, or not, and for how much. It is foreseeable that insurers, or some of them, will delay as long as possible any decision to pay Covid claims and that is bad for a ‘professional’ industry”.
To read the full bulletin – https://www.flaxmanpartners.co.uk/fca-high-court-judgment-a-rich-vein-of-opportunity/