Kristen Zanoni  |  October 1, 2020

Category: Covid-19

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A clipboard holding a business interruption insurance application form, surrounded by clips, a pen and a calculator - business interruption test case

The Financial Conduct Authority (FCA) has filed an expedited appeal in the COVID-19-related business interruption test case against British insurance firms, Reuters reported.

The FCA filed the appeal in hopes of an agreement, but ultimately the FCA wants to avoid the appeals process entirely. 

The FCA confirmed on their website that a “leapfrog” appeal application has been filed. Throughout the business interruption test case, the FCA has intended to provide crystal clear clarity to speed up the process so that businesses can get the money the FCA believes they are owed.

According to a Business Insurance report, seven insurers plan to appeal the Supreme Court’s ruling on the test case.

A court hearing associated with the appeal applications is scheduled for 2 October.

Hundreds of thousands of mostly small and mid-sized businesses in the U.K. are anxiously awaiting the conclusion of the FCA test case against eight insurance companies. Businesses have been waiting to see if their insurers will pay out immediately for coronavirus pandemic-related business interruption or if they will appeal.

The deadline for an agreement in the business interruption test case was 30 September, according to Reuters. 

The business interruption test case was launched when major insurance firms were denying insurance claims by businesses who were forced to shut down during the pandemic’s restrictions. 

London’s High Court determined the eight insurers wrongly denied the businesses’ claims. 

Graphic of a gavel lying on top of a folder containing paperwork that says "legal appeal" - business interruption test caseThe court ruled the policyholders should have been compensated for business losses during the lockdown. There were key arguments that swayed the court in the business’ favour.

The FCA argued small businesses bought policies to help protect them against unforeseen circumstances, yet they were not financially assisted during health authority-mandated shutdowns. 

The eight insurers in the business interruption test case argued there is no clause in their policies that distinctly covers COVID-19-related shutdowns and losses.

The business interruption test case outcome will affect about 370,000 British businesses and over 60 insurance companies. 

The ruling in the FCA test case could result in billions of pounds in damages being paid to businesses affected by COVID-19 restrictions and lockdowns. 

The FCA announced it is working closely with the insurance companies to speed up the business interruption test case, according to Insurance Business U.K. 

RSA, one of the insurers in the FCA test case, announced it desired leave to appeal, while insurer Hiscox has applied for an appeal but is indecisive on whether to go through with it, Reuters reported.

“In the event that any party seeks permission to appeal, Hiscox may remain a party to any subsequent proceedings which could impact its ability to progress claims until the final outcome of the industry test case is known,” Hiscox told Insurance Business U.K.

“Hiscox will communicate an update on the industry test case to relevant policyholders after the hearing on October 02, including any impact that an appeal by the FCA, the interveners or any other party may have on its ability to progress claims,” the insurer continued. “In the meantime, Hiscox will continue to work with brokers and policyholders to gather information to enable it to process claims without delay once the final outcome is known.” 

“The recent judgement confirmed that the wordings represented by Zurich do not provide cover for business interruption in relation to the COVID-19 outbreak,” insurer Zurich told Insurance Business U.K. 

What do you think the outcome of the FCA test case will be? Share your opinion in the comments.

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