COVID 19 and Business Interruption Claims

The Financial Conduct Authority Give their Judgement on Business Interruption Insurance and COVID 19

Some business owners who assumed their business interruption cover would protect against losses due to the COVID 19 pandemic were disappointed to learn from their insurer that they were not covered – even if their policy had a disease clause (infectious or notifiable diseases) and a non-damage denial of access clause (such as public authority closures or restrictions).

Complaints from policyholders flooded into the FCA and prompted an investigation and an urgent test case to clarify the situation. Eight different insurers, including Hiscox and Zurich, who had resisted claims under their business interruption cover, submitted examples of their policy wording alongside their justification as to why they felt this pandemic was excluded from their policy cover.

On the 15 September the FCA found broadly in favour of the policyholders, rather than the insurers, stating that:

• the Covid-19 pandemic and the Government and public response are a single cause of the covered loss – a key requirement for claims to be paid.
• most but not all of the disease clauses submitted by insurers provided cover for the pandemic.
• in some policy wording cases the denial of access also provides cover, but this depends on the detailed wording of the clause and how the business was affected by the Government response to the pandemic.

As always the devil is in the detail and each business owner’s situation will be different. The FCA have told insurers that even if they are looking to appeal the FCA decision they must inform their policyholders about the judgement and prepare to meet claims.

Find out more about the FCA Test Case on Business Interruption Cover