Monday 5 October 2020 7:16 am

FCA gets green light to take insurance giants to Supreme Court over Corona policies

A test case launched by the Financial Conduct Authority against eight major insurance companies will move to the Supreme Court after magistrates greenlit the case for a fast-track appeal.

On Friday, a High Court in London approved the FCA’s request to let the Supreme Court decide on the matter in which the market regulator is seeking clarification on the wording of numerous insurance policies in relation to claims filed as a result of the pandemic.

A ruling by the UK’s highest court would be “the fastest way to get legal clarity as quickly as possible for all parties, in the event that it is not possible to resolve the outstanding issues in the coming weeks,” the FCA clarified.

“We will continue discussions with insurers and action groups, to find a solution which resolves the outstanding issues as soon as possible to enable pay-outs on eligible claims,” the regulator added.

Failure to agree

The FCA launched legal proceedings in June after it failed to find an agreement with the insurance sector on hundreds of policies. The watchdog wants clarification over whether 21 policy wordings cover disruption and government-ordered closures as a result of the Covid-19 pandemic.

The watchdog initiated the test case with eight insurers whose policies it considered representative of the broader group of insurers that would be impacted by the test case. The final ruling could affect around 700 types of policies, 60 insurance businesses and just under 400,000 policyholders.

Read more: High standards will keep London competitive, incoming FCA chief says

Wording in hundreds of policies

The FCA wants judges to clarify whether 21 policy wordings cover disruption and government-ordered closures. The case could affect around 700 types of policies, 60 insurance businesses and just under 400,000 policyholders.

“Our objective throughout this case has been to achieve clarity for everyone involved as quickly as possible and that remains the case. We had hoped to reach an agreement with the insurers,” the FCA said.

The Supreme Court is expected to handle the case before the end of this year. The appeal may further delay payouts on filed claims by thousands of primarily small and medium sized businesses, many struggling as a result of the recent lockdown and ongoing pandemic-related restrictions.

The companies involved are some of the biggest insurance names in the City, namely QBE, Hiscox, RSA, MS Amlin, Ecclesiastical, Argenta, Zurich and Arch, although not all of them will be part of the Supreme Court case.

A spokesperson for Ecclesiastical Insurance clarified to City A.M.: “Due to the fact that the Financial Conduct Authority has confirmed it is not appealing the High Court’s Judgment which found that losses arising from the Covid-19 pandemic are not covered by Ecclesiastical Insurance’s Business Interruption policies, we will be taking no further part in any Supreme Court proceedings on this matter.” 

“We recognise that this has been a difficult and uncertain period for customers and we now hope the judgment provides the certainty and clarity that the Test Case was designed to create,” he added.