Mactavish, the specialist outsourced insurance buyer and claims resolution expert, says the legal ruling today on the FCA led case around business interruption insurance policy wordings in relation to claims caused by the Covid-19 pandemic is welcome, but its limited focus means that very few policyholders will be able to use this to achieve speedy resolution of their claims and get the cash their business needs.
Mactavish says the remit of the legal case was far too limited and should have looked at a wider range of issues and policy wordings relating to business interruption insurance claims linked to COVID-19.
While the headlines today suggest a great victory for policyholders, the reality on the ground will be very different. Mactavish say that while a small proportion of the relevant claims cases may now settle, the vast majority will either be unaffected or only marginally better off as a result of this judgement, with many legal hurdles still to overcome.
The case only considers two sub-aspects of Business Interruption policies: Disease and Prevention of Access Wordings (and only some variants of them). The majority of companies’ claims will fall outside of the scope of the FCA action, and most policyholders are no nearer to achieving resolution.
Even where a policy is within the action’s scope, the FCA’s own press release confirms this point: “The judgment does not determine how much is payable under individual policies… Each policy needs to be considered against the detailed judgment to work out what it means for that policy.” The FCA seem to accept that significant roadblocks remain despite this judgment; Mactavish believes the FCA should now explain how it will go about clearing the way for the majority of SMEs to achieving a fair outcome.
In addition to this, Mactavish argues a thorough review should also have looked at the role played by brokers in the sale of these policies. It says there is a separate but also sizeable minority of policyholders who would have had valid C-19 BI cover were it not for negligence on the part of their broker, but this issue has been overlooked.
Bruce Hepburn, CEO, Mactavish said: “Ultimately, today’s decision just confirms that a selection of the claims that we felt should have been settled are now likely to be paid, but it gives little assistance to other claims that were not covered by the review. Policyholders and their advisers will now need to work out what today’s ruling means for their claims – for them, this is the start of the battle, not the end.
“The review did little more than look at a small subset of policies and claims, and then a subset of some of the obstacles to these being settled.”
Mactavish says the FCA must now act as a catalyst for marshalling the insurance sector to pay-out claims that are deemed valid as a result of today’s ruling as quickly as possible, and agree on a way forward for the tens of thousands of outstanding claims where today’s ruling means no one is any the wiser.
“In practical terms, other than in a few specific cases, policyholders are now faced with the task of interpreting a very long and complex legal judgement – which may in itself be appealed – before taking up their specific case with their insurer. In reality, this means that having delayed taking these steps in the hope that the FCA case would bring clarity, they are about to embark on a lengthy and expensive journey to resolution. Some will have the means to pursue this, some will not, and some are no doubt already discussing closure.
“With so many businesses on the breadline during this crisis, the one thing many don’t have is time. They need cash, and they need it now. A lot now hinges on how the FCA uses its muscle to advance the interests of policyholders and hold the feet of insurers and brokers to the fire.”
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