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Business Interruption Insurance Update

Business Interruption Insurance Update

Last week we told you that the Financial Conduct Authority (FCA) was considering what measures it should take to help businesses that had tried unsuccessfully to claim on their Business Interruption (BI) insurance policies.

The Coronavirus pandemic and the Government controls imposed as a result are causing a substantial level of loss and distress for businesses, in particular for SME’s.

A large number of claims are being made to insurers under the terms of BI insurance policies.

There is continuing and widespread concern about the lack of a positive response to some of those BI insurance policies and the basis on which some insurers are making decisions in relation to claims.

On 1st May 2020 the FCA said that that they intend to obtain Court declarations aimed at resolving contractual uncertainty in selected BI insurance policies.

In order to help small and often struggling businesses, the FCA will put forward policyholders’ arguments, in a single collective action, to their best advantage.

They are aiming to obtain legal guidance in this way more quickly and at a lower cost to policyholders than would be the case if individual companies took their own direct Court actions.

The FCA recognises that many claims will already be the subject of negotiation or other dispute resolution processes.

This proposed action is not intended to impact this normal individual claims process; rather, it is designed to assist policyholders, and particularly SME’s, whose claims are being refused when they think that their insurance company should respond positively. 

The intended action will not prevent individuals and organisations from pursuing issues through negotiated settlement, arbitration, Court proceedings as a private party, or taking eligible complaints to the Financial Ombudsman Service.

The result of the test case will be legally binding on the insurers that are parties to the test case in respect of the representative sample considered. 

It will also provide persuasive guidance for the interpretation of similar policy wordings and claims that can be taken into account in other Court cases, by the Financial Ombudsman Service and by the FCA, in looking at whether insurers are handling claims fairly.

The FCA wants to ensure that policyholders and insurance intermediaries are properly engaged throughout this process. 

Invitation to policyholders & insurance intermediaries to provide information

The Coronavirus pandemic will have affected policyholders in different ways. The issues relevant to the intended proceedings will therefore be wide-ranging and complex.

The FCA recognises that the intended proceedings will better achieve their consumer protection and market integrity objectives if they cover as broad a cross-section of policies and issues as is compatible with a speeded-up Court process.

The FCA is currently reviewing extensive material provided by insurers to do this. 

At this stage, the FCA is inviting policyholders and insurance intermediaries who are aware of unresolved disputes with insurers over the terms of BI policies to engage with them, if they want them to take their concerns into account as part of the test case.

In particular, the FCA is asking policyholders who have been affected to supply the following information:

  • Your arguments as to why you consider cover should be available, together with details of policies that you consider should have received a positive claim response but have been rejected
  • Brief relevant facts of your case/s

The FCA will consider all arguments raised by both policyholders and insurers.

They will treat the information they receive as confidential and covered by the FCA’s ‘litigation privilege’, which means that they would be entitled not to produce it to a third party or a Court and could not legally be forced to do so.

Please email any material you want them to consider to:  

Given the volume of information they expect to receive they cannot commit to replying to individual communications.

How the FCA intends to engage with policyholders

They intend to engage with policyholders at key stages of the Court action, including:

  • Considering those arguments and factual circumstances communicated by policyholders and insurance intermediaries to the FCA
  • Using the arguments, policies and fact patterns put forward by policyholders to inform the sample of policy wordings and fact patterns (a summary of the key facts of a case) to be used in the Court proceedings
  • Making public all the ‘pleadings’ (arguments and reasons) in the test case
  • Where policyholders and action groups have appointed legal representatives to represent them, having discussions during the preparation of the FCA’s pleadings and submissions
  • Publishing other material relevant to the test case – provided that the FCA is legally entitled to do so.


As a Building Legacies client you can contact us for help and advice via emailsocial media and our website. You can also get in touch with your Business Growth Manager (BGM).

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We will issue further advice and guidance Bulletins as the Covid-19 situation develops.