Financial Conduct Authority  

FCA takes SME insurance cases before court

FCA takes SME insurance cases before court

The Financial Conduct Authority is seeking clarity over uncertain policy wording in insurance policies for small and medium sized companies affected by the coronavirus pandemic. 

In a statement on its website today (May 1) the regulator confirmed it intended to place before the courts a sample of cases in which it was uncertain whether a business was covered by its business interruption insurance for losses caused by the virus fallout. 

Business interruption insurance covers a firm for loss of income during periods it cannot carry out business as usual due to an unexpected event. 

The FCA said it did not intend to resolve all possible disputes involving business interruption policies, but hoped court clarity on policy wording would "resolve some key contractual uncertainties".

The watchdog warned "decisive action" was appropriate given the severity of the potential consequences for small firms in the current coronavirus emergency.

In a Dear CEO letter sent to insurers earlier this month the FCA warned the majority of small and medium sized businesses would not be covered by their insurance to deal with the pandemic, but it did not intend to intervene in these cases as a regulator. 

Christopher Woolard, interim chief executive of the FCA, said: "We have been clear that we believe in the majority of cases, business interruption insurance was not purchased to, and is unlikely to, cover the current emergency. 

"But there are also some other policies where firms may consider there is no doubt about wording and decline to pay a claim, but customers may still consider there is genuine uncertainty about whether their policy provides cover.

"Our intended court action is designed to resolve a selected number of key issues causing uncertainty as promptly as possible and to provide greater clarity for all parties, both insured and insurers."

The court action was intended to help both insurers and the insured, the FCA said, but would not determine how much should be paid under individual policies. 

The regulator said cases placed before the court would be "carefully chosen as a representative sample" of the most frequently used policy wordings that were giving rise to uncertainty under current circumstances. 

The watchdog said: "The FCA will seek to put cases before the court on an agreed basis with the insurers concerned in order to get the fastest possible judgement.

"Individuals can still access the financial ombudsman or the courts if they qualify and wish to do so."

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