Ruling is to the benefit of businesses, risk professionals and insurance buyers, states UK risk management association

The Association of Risk and Insurance Managers (Airmic) has welcomed a ruling by the High Court, which found in favour of the group of SME policyholders who had business interruption claims that were linked to the coronavirus pandemic rejected by insurers.

The test case was brought on their behalf by the Financial Conduct Authority, which said it was seeking clarity on how wordings under ‘the occurrence of human infectious or contagious disease’ and ‘denial of access’ clauses should respond.

The High Court ruled in favour of the FCA’s interpretation of non-damage BI policy wordings across the majority of key contention areas. The judgement on 15 September also clarified that the pandemic and the Government and public response were a single cause of the covered loss.

“Insurers should reflect on the clarity provided here,” said Christopher Woolard, interim chief executive of the FCA, noting that “roadblocks to successful claims” had been removed.

Airmic chief executive John Ludlow said the associated was pleased, on behalf of its members, with the ruling which vindicated SME policyholders. ”2020 has already been a tough year for business across most sectors, due to COVID, which has been exacerbated by the harsh insurance market.

”We think this ruling is to the benefit of businesses, risk professionals and insurance buyers, but importantly should serve to smooth a period of uncertainty faced by policyholders, and especially for those in the SME space.”

Meanwhile, Christopher Croft, CEO of London broking association LIIBA praised the swift action of the regulator and said the insurance industry would have to work hard to rebuild its tarnished reputation. 

“Clients deserve clarity, and the fact that this case had to take place at all is a rebuke to our industry and the often obscure language we use. Customers deserve to understand exactly what it is they are getting in language they recognise.”

“The swift action taken by the FCA to bring clarity after the fact is to be commended. Many other countries are looking on with interest as their BI cases grind slowly through their legal systems.”

“The fact that the court found in favour of the policyholders hopefully brings this action to a close,” he added. ”The industry’s reputation has been damaged by the debate over exactly what is or is not insured, and we need to think hard about how we redress that and introduce absolute clarity into the product our customers buy.”

”This will include challenging the principles at the heart of these cases – principles which insurers have held dear but which we have seen make no sense to the general public.”