Business Interruption Policies: Insurers Failing Policyholders
Earlier in the pandemic, the Supreme Court’s landmark ruling in the FCA test case on business interruption policies led to the FCA making clear to insurers that they should handle claims fairly and promptly. So it’s concerning that it seems insurance companies are not playing ball.
A new ruling has also shows how the courts approach individual cases.
This month, it emerged that one law firm, Provenio Litigation LLP, is preparing to act on behalf of thousands of covid-19 business interruption policyholders, saying insurers are playing “fast and loose” with the Supreme Court ruling and rejecting potentially legitimate claims.
That ruling substantially allowed the FCA’s appeals on the sample wording of a number of business interruption policies and dismissed the eight insurers’ appeals.
The case was estimated to affect as many as 370,000 policyholders involving 60 different insurers. However, the latest figures from the financial regulator showed that as of 6 April 2021, insurers have accepted claims in just 35,438 cases. This prompted the FCA to issue a further reminder to insurers of the need to handle claims promptly and fairly and to provide reasonable guidance to help a policyholder to make a claim.
Rockliffe Hall v Travellers Insurance Co
However, it is important to remember that the FCA test case concerned sample wording - the ruling was not intended to apply to all wording in all insurers’ business interruption policies. So it was perhaps inevitable that a dispute concerning different wording, not within scope of the SC ruling, would eventually reach the courts.
In the recent case, the High Court struck out an insured’s claim on the basis that covid-19 did not fall within the policy’s infectious disease clause.
In Rockliffe Hall1, the claimant – who runs a golf course and hotel – made a claim under its business interruption policy. The policy expressly defines the phrase ‘Infectious disease’ as meaning the diseases on a closed list of 34 such diseases. Covid-19 does not appear on that list (nor did it include SARS or influenza), nor did the policy include any ‘catch-all’ wording on which the claimant could rely.
The insurer resisted the claim saying the claim was doomed to fail because the terms of its policy were clear and did not cover such losses.
The hearing was not a full trial, rather it was to rule on a point of construction which the court determined on the (“very limited”) written evidence before the judge. A proper construction of the policy required working out what a reasonable person would have understood the contracting parties to have meant by the language used (‘reasonable person’ not being a “pedantic lawyer” – as the Supreme Court observed in the FCA ruling).
The court found that on the plain wording of the relevant parts of the policy, the claim was not covered by the policy.
What does this mean?
Hindsight can be a great thing, but perhaps not so much in business. But lessons can be learnt, particularly in light of the past year: when contracting with insurance companies, and when negotiation terms of business with other parties, it is wise to ensure all eventualities are covered and the wording clearly reflects what was intended at the time.
During a pandemic, the importance of understanding the limits of policies of insurance and how they might work in practice has, perhaps, never been so important.
1Rockliffe v Travellers Insurance [2021] EWHC 412
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