Coronavirus presence subject of FCA business interruption consultation

The Financial Conduct Authority (FCA) is running a consultation on how the presence of coronavirus may be proved when making a business interruption claim.

The consultation follows the High Court’s ruling in favour of policyholders earlier this year. Aspects of the FCA’s business interruption test case are on appeal at the Supreme Court, with a decision not expected until January 2021.

The FCA’s proposed draft guidance builds on the High Court’s judgment and is intended to ensure that the process of proving the presence of coronavirus is made as simple as possible for eligible policyholders.

“This will enable them to receive claim payments as early as possible should the Supreme Court uphold the High Court’s decision that relevant policies potentially provide cover in response to the pandemic,” the FCA said in a statement.

The declarations of the High Court on proving the presence of coronavirus and covered by the FCA’s draft guidance are not under appeal and not expected to be affected by the judgment of the Supreme Court.

The High Court’s judgment provided authoritative guidance for the interpretation of the 700 policy wordings identified as affected by the test case. Twelve out of the 21 policy types tested were found to have the potential to provide cover in response to the pandemic, while nine were not.

Some business interruption insurance policies require the policyholder to prove the presence of coronavirus within a particular area around their premises. As part of its decision, the High Court made declarations as to the types of evidence that policyholders can use to prove the presence of coronavirus, and the methodologies which they may use in that process.

The FCA’s proposed draft guidance explains types of evidence and methodologies that policyholders can use, together with links to further useful information. It also gives the FCA’s views on how insurers should assess that evidence when handling claims fairly.

The consultation closes on 18 January 2021, with a view to the guidance going into effect as soon as it is formally issued.

Mark Dugdale