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London judges rule some insurers were wrong to reject businesses' COVID claims

The watchdog brought the test case against eight insurers, including Hiscox, RSA, QBE and Zurich , in June to clarify whether 21 types of business interruption (BI) policy wordings should pay out for closures and disruption caused by the pandemic. The FCA has estimated that the case could affect more than 60 insurers and 700 different types of policies because many insurance policies have similar wording.

Reuters | Updated: 15-09-2020 16:28 IST | Created: 15-09-2020 16:28 IST
London judges rule some insurers were wrong to reject businesses' COVID claims

London judges have ruled that some of the world's biggest insurers were wrong to reject thousands of claims from small firms battered by the COVID-19 pandemic, Britain's Financial Conduct Authority (FCA) said on Tuesday. The FCA, which brought the test case against insurers in a closely-watched lawsuit estimated to affect 370,000 businesses and billions of pounds of insurance claims, said the court had found in favour of policyholders' arguments on the majority of key issues in a complex, 162-page judgment.

However, the insurers' trade body, the Association of British Insurers (ABI), said the judgment divided evenly between insurers and policyholders on the main issues. The watchdog brought the test case against eight insurers, including Hiscox, RSA, QBE and Zurich , in June to clarify whether 21 types of business interruption (BI) policy wordings should pay out for closures and disruption caused by the pandemic.

The FCA has estimated that the case could affect more than 60 insurers and 700 different types of policies because many insurance policies have similar wording. Small businesses - from cafes, wedding planners and beauty parlours to events businesses - said they faced ruin after attempts to claim compensation for business losses during the deadly pandemic, that has prompted the most stringent government restrictions in peacetime history, were rejected by insurers.

Some have signed up to parallel group actions, alleging legitimate claims have been rejected. But the FCA case offered a new legal route by pooling together a group of company policies and taking insurers to court with minimal costs to businesses. The case was designed to quickly clarify whether the pandemic and a government lockdown in March should trigger BI policies, which provide cover when insured premises cannot be used because of restrictions imposed by a public authority and in the event of a notifiable disease or infection.

Insurers have argued that most policies did not cover the pandemic, that they were paying out valid claims as quickly as possible and that being forced to stump up for all losses from the pandemic would be catastrophic for the insurance industry, and its backup, the reinsurance industry.


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