Coronavirus insurance test case heads to UK Supreme Court

LaToya Harding
·Contributor
·2-min read
The Supreme Court in London, as lockdown remains in place across the UK to help curb the spread of the coronavirus. (Photo by Aaron Chown/PA Images via Getty Images)
The four-day appeal hearing will determine whether insurers should be obliged to pay out on business interruption claims related to the coronavirus outbreak. Photo: Aaron Chown/PA Images via Getty Images

A test case brought forward by the Financial Conduct Authority (FCA) against several insurers over business interruption payouts headed to the Supreme Court on Monday.

The four-day appeal hearing will determine whether insurers should be obliged to pay out on business interruption claims related to the coronavirus outbreak.

During the first national lockdown that took place in March, hundreds of thousands of firms, which were forced to close their doors, made claims on their business interruption insurance in a bid to cover lost income.

However, a number of insurance companies, including Hiscox (HSX.L) and RSA (RSA.L), disputed these claims, arguing that policies were never meant to cover such unprecedented restrictions.

Payouts have been put on hold as the test case was fast-tracked for appeal in the highest court in England.

The City watchdog has estimated that the result could affect around 200,000 policyholders, while the Association of British Insurers has valued the claims at £900m ($1.1bn). The original case involved the following insurers: Arch Insurance; Argenta; Ecclesiastical Insurance Office (ELLA.L); Hiscox; MS Amlin; QBE; RSA; and Zurich (ZURN.SW).

The high court found in favour of Zurich and Ecclesiastical so they are no longer part of the appeal.

READ MORE: Zurich Insurance sees $750m in 2020 COVID-19 claims

Michael Kill, chief executive of Night Time Industries Association (NTIA) said: “The night time economy and hospitality sector has been decimated by the impact of COVID-19, not least by the behaviour of insurance companies in their management of Business Interruption claims since the closures of many businesses due to the pandemic.”

"We are now at the final hurdle with the FCA Supreme Court Appeal hearing this week, and can feel an immense amount of frustration and anger from businesses at the insurance companies that have utilised this process, although expedited, to elongate the potential outcome."

He added: "It has to be said that you can only feel that this strategy by insurers will purposely see many businesses close without seeing their claims fulfilled, bringing into question the integrity of the insurance sector.”

In June FCA interim chief executive Christopher Woolard said that the court action is “aimed at providing clarity and certainty for everyone involved in these business interruption disputes, policyholder and insurer alike.”

The FCA will expect insurers to respond quickly to the final judgement, which will come in a few weeks.

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