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Update on Business Interruption Insurance Court Case – 19/06/2020

Update on Business Interruption Insurance Court Case – 19/06/2020

What the test case will decide:

The result of the test case, brought by the Financial Conduct Authority (FCA), will be legally binding on the insurers that are parties to the test case in respect of the interpretation of the representative sample of policy wordings considered by the Court.

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 test case is not intended to encompass all possible disputes but to resolve some key contractual uncertainties and ‘causation’ issues to provide clarity for policyholders and insurers. 

It will not determine how much is payable under individual policies but will provide the basis for doing so.

The FCA has consulted on draft guidance setting out their expectation that, following final resolution of the test case (including any appeals), insurers should apply the judgment in (re-)assessing all outstanding or rejected claims and complaints which may be affected by the test case (except complaints that have been referred to the Financial Ombudsman Service).

The FCA expects to publish a list in early July of all policies with claims that may be affected.

The Steps Taken by the FCA, Latest Updates And Timetable

The steps that the FCA has taken so far are set out in the latest updates section below.

Following a court order on 16th June, it is expected that the test case will proceed on the following timetable: 

9 JuneFCA started claim in the High Court
16 June Case management conference, at which the Court fixed the timetable for the case and other procedural matters
23 JuneInsurers file Defences
26 JuneFurther case management conference, at which the Court will deal with any outstanding procedural matters to ensure the case is ready for trial
3 JulyFCA files Reply
1st half JulySkeleton arguments and replies served
20-23 July and 27-30 July 8 day Court hearing before Lord Justice Flaux and Mr Justice Butcher 

Engagement with Policyholders and Insurance Intermediaries

The FCA has developed a Policyholder Engagement Statement for policyholders and insurance intermediaries which sets out their approach to the High Court test case for BI insurance policies, with the key points as follows:

  • The FCA will put forward policyholders’ arguments to their best advantage using a highly experienced counsel team including Colin Edelman QC, Leigh-Ann Mulcahy QC, Richard Coleman QC, and Herbert Smith Freehills.
  • The intended action will not prevent policyholders from pursuing issues through negotiated settlement, arbitration, Court proceedings as a private party, or taking eligible complaints to the Financial Ombudsman Service.
  • The FCA wish to ensure that policyholders and insurance intermediaries are properly engaged throughout the test case process. 
  • Information provided by policyholders in response to FCA requests will be treated as confidential and covered by the FCA’s litigation privilege.
  • The FCA will consult policyholders and insurance intermediaries at key stages in the test case.
  • See the latest updates section below for how you can comment at each stage of the case.

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Order from first Case Management Conference on 16 June 

At this hearing, Mr Justice Butcher made an order relating to how the test case is to proceed, including that:

  • the case will be expedited (heard urgently) in accordance with the timetable above
  • the Financial Markets Test Case Scheme will apply
  • the second Case Management Conference and final hearing will be live-streamed (details below)

The FCA will publish a copy of the Court order and transcript for the hearing once they are available.

Link to Live-Stream Future Hearings

The Court has agreed to live-stream the second Case Management Conference on 26th June and the final hearing starting on 20th July. The starting time for these hearings can be checked on the final court listing(link is external) after 4.30pm on the day before each hearing.

In order to view these hearings live:

Finalised Guidance and Feedback Statement Published

The FCA has published Finalised Guidance setting out their expectations for insurers and insurance intermediaries when handling claims and complaints for business interruption policies during the test case brought by the FCA.  They have also published a Feedback Statement summarising the feedback received on our draft guidance published on 1st June.

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