The Financial Conduct Authority’s test case, which aims to clarify the extent to which business interruption insurance covers losses arising from the Covid-19 pandemic, will be heard by the High Court in an eight-day trial starting on 20 July.
Mr Justice Butcher today ordered expedition of the hearing, ruling that there is “real pressing urgency to the matter”.
The FCA says that, in the wake of widespread disruption and business closures during the lockdown, many customers have made claims for the resulting losses under their BI insurance policies, but there has been widespread concern about the lack of clarity and certainty when it comes to those policies, and the basis on which some firms are making decisions in relation to claims.
It said: “We believe the circumstances of the current coronavirus emergency and its effect on businesses holding BI policies mean this uncertainty needs to be resolved as quickly as possible. We intend to obtain court declarations as part of a test case aimed at resolving the contractual uncertainty around the validity of many BI claims.”
The court’s eventual decision 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, including in Scotland and Northern Ireland.
The FCA said: “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.”
According to the claim form issued at the High Court on 9 June, the FCA has brought the test case against insurers including Hiscox, Zurich and Royal & Sun Alliance seeking a determination of a number of key points of contractual construction and principle relating to insurance coverage and causation during the pandemic.
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