FCA tells insurers: See you in court, after Covid claims are rejected

FCA tells insurers: See you in court, after thousands of desperate firms have their Covid claims rejected

Desperate businesses battling to survive the Covid-19 crisis were given a glimmer of hope yesterday as the City watchdog vowed to take insurance companies to court.

Insurers have come under fire for refusing to pay out claims to companies which have been devastated by the lockdown.

In an unprecedented move, the Financial Conduct Authority said it plans to resolve this as quickly as possible – by putting some of the insurance policies in front of a judge. 

Court threat: Insurers have come under fire for refusing to pay out claims to companies which have been devastated by the lockdown

Christopher Woolard, interim chief executive of the FCA, said the ‘decisive action is appropriate given the severity of the potential consequences for customers’.

Most business interruption policies only cover more common hazards which can put a firm out of action, such as fire and flooding.

But some specifically promise to cover disruption caused by infectious disease or pandemics.

Despite this, insurance companies are wriggling out of paying claims, in some cases arguing that Covid-19 is not covered as it is a new disease, or that the impact of the Government lockdown is not included in the policy.

Lloyd’s of London insurer Hiscox, FTSE 100 giant RSA, French firm Axa and Australia’s QBE are among the firms under fire. 

Their refusal to pay up has left many businesses on the brink, particularly when many have also been unable to secure Government-backed emergency loans from their bank.

The FCA said it intends to present a judge with a sample of the most frequently used policy wordings from a range of different insurers which ‘are giving rise to uncertainty’.

Insurance companies are already facing class-action lawsuits from furious businesses.

More than 300 firms have joined the Hiscox Action Group, while hospitality firms, including restaurants, bars and nightclubs, have been invited to join the Hospitality Insurance Action Group which was launched on Wednesday.

Both operations are being run by law firm Mishcon de Reya.

Lawyers have seized on Hiscox policy documents which promise to cover ‘the inability to use the insured premises due to restrictions imposed by a public authority’ that was caused by an ‘occurrence of a human infection or human contagion disease, an outbreak of which must be notified to the local authority’.

Hiscox has rejected claims, telling firms the ‘cover only applies when there is an incident within a one mile radius of the insured building’.

It has also told firms suffering during the lockdown that ‘these types of events are simply too large and too systemic for private insurers to underwrite’.

Huw Evans, director general of the Association of British Insurers, said: ‘We support any process that will provide clarity and certainty for the minority of customers who are disputing whether they should be covered.’