By Huw Jones and Carolyn Cohn
LONDON (Reuters) – Britain’s financial watchdog said it would urgently ask the courts to clarify uncertainty over whether businesses can claim compensation for disruption caused by the coronavirus pandemic.
A national lockdown to fight the pandemic has forced many companies to temporarily suspend operations and furlough staff.
“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,” Financial Conduct Authority interim chief executive Christopher Woolard said in a statement on Friday.
“However, there remain a number of policies where it is clear that the firm has an obligation to pay out.”
The FCA is seeking a declaration from the court to resolve a “selected number of key issues causing uncertainty as promptly as possible” and provide greater clarity for insurers and their customers.
The watchdog said court action would not determine how much is payable under individual policies, but will provide the basis for doing so.
Lloyd’s of London insurer Hiscox is
The insurers did not immediately respond to comment on Friday. They have previously said they seek to pay valid claims quickly.
The FCA said it had written to “a small number of firms” to ask if they were declining business interruption claims. It said it would seek a response by May 15 and would then “consider which firms to ask to join the court process”.
The Association of British Insurers said it would “support any process that will provide clarity and certainty for the minority of customers who are disputing whether they should be covered”.
It said the vast majority of business interruption policies did not cover pandemics and the UK government had confirmed it would not seek to retrospectively change contracts.
In the United States, eight states have introduced legislation which would require insurers to pay claims, mainly to small businesses, despite exclusions.
The FCA also set out measures to support consumers and businesses who hold insurance products and who are facing other issues as a result of coronavirus.
The package sets out the watchdog’s expectations that insurers should consider whether their products still offer value to customers in the pandemic and whether they can be doing more for those suffering a financial impact because of coronavirus, the FCA said.
The watchdog said that insurers should grant premium payment holidays to customers, if requested, for a rolling period of up to three months. The measures come into effect on May 13.
(Additional reporting by Muvija M., editing by Kirsten Donovan)
