Photo: Toby Melville/Reuters
The British High Court issued an eagerly awaited very complex ruling on whether insurance companies should pay premiums to companies that are bound to close during the pandemic.
The test case was filed against eight insurance companies by the Financial Conduct Authority, the UK’s financial oversight agency. Thousands of companies have sold out-of-business insurance that includes illness and denial of access provisions, but acted after complaining that the insurance company refused to compensate for losses.
Attorneys now analyze the 162 page report to pinpoint the meaning of the judgment.
However, according to the FCA, courts have been shown to favor claims made to policyholders on most major issues.
This means more businesses can claim compensation for outages they have experienced in the last 6 months.
FCA Interim Chief Executive Officer Christopher Woolard explains:
We’ve brought test cases to address the lack of clarity and certainty that existed in the wider market, as well as many policyholders making business outage claims. We are pleased to learn that the courts are practically in favor of the claims we have made on most major issues.
Today’s judgment is an important step in addressing the uncertainty faced by policyholders. We thank the courts for making the decision quickly, and the speed at which the judgment was reached is well reflected in all parties.
Woolard added that today’s judgment removes many obstacles to successful claims and clarifies which claims will not succeed.
He urges the insurance company to keep a record and, if appropriate, pay the claim promptly to get a job.
Insurance companies should reflect the clarity provided here and should consider the actions they can take now to proceed with the type of claim the judgment says must be paid, regardless of possible appeal. They also need to communicate directly and quickly with policyholders affected by the judgment to explain the next steps.
However, it is not immediately clear how many customers will benefit.
Insurance group Hiscox, for example, has told shareholders that the additional claim for Covid-19 will be less than $100 million.
This ruling clarifies that less than a third of Hiscoxs 34,000 UK business disruption policies can respond. The scope of the application of these policies is basically limited only to customers and certain circumstances forcibly closed by government order.
Hiscoxs’ share price is now 15% higher after first falling when the ruling came out.
But activists demanding that the insurance industry do their job have a historic victory.
Hiscox Action Group says:
The High Court ruling means that hundreds of Hiscox Action Group members who were forced to close their buildings during the pandemic are now required to receive insurance money from Hiscox Insurance.
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