The FCA test case in relation to business interruption claims

On 9 June 2020, the Financial Conduct Authority (‘FCA’) commenced ‘test case’ litigation. The litigation covers various matters in respect of coronavirus-related business interruption insurance claims where the policyholder has not suffered any damage to its property. It is intended by the FCA that Court determinations given in the ‘test case’ will assist in resolving some key contractual uncertainties and causation issues, and thereby provide clarity for policyholders and insurers.

The ‘test case’ Court hearing is expected to start on 20 July 2020 and finish on 30 July 2020. The Court’s judgment will be delivered and made public shortly after. However, the final resolution of the test case will not be achieved until any appeal(s) have either been concluded or the time for appealing has expired.

To clarify, pending the outcome of the ‘test case’, any decision which AXA Insurance UK plc (‘we/AXA’) have already communicated to you remains unchanged. Where a decision is still under consideration, any final decision will await the outcome of the ‘test case’.

AXA is not one of the Insurers that is a defendant in the ‘test case’, although the outcome will provide us with guidance as to interpretation of similar policy wordings.

What are the implications of this for AXA policyholders?

If AXA has already rejected a claim under an AXA policy (or made a deduction for causation issues) but the claim might be affected by the final resolution in the ‘test case’, then AXA will reassess the claim in the light of the outcome of the ‘test case’ with a view to applying the judgment(s) in the ‘test case’ as relevant, and will promptly inform the policyholder of the outcome of the reassessment.

The ‘test case’ will not determine precisely how much (if anything) is payable under individual policies.

Furthermore, a number of types of policies / clauses are not being considered by the Court as part of the ‘test case’. Matters not being considered include, without limitation:

  • Policies which only provide business interruption cover where the policyholder has suffered damage to its property.
  • Clauses which provide cover if there is a specific disease as set out in an exhaustive list of diseases which does not include coronavirus.
  • Clauses which provide cover if there is notifiable disease or some other categorisation of disease, but which require the disease to be present on the insured premises.

Where a complaint has been made about a claim that might be affected, then unless prior to the final resolution of the ‘test case’ AXA has already received notification from the Financial Ombudsman Service (‘FOS’) that it has accepted a particular complaint for consideration AXA will on final resolution of the ‘test case’ reassess the complaint and promptly inform the policyholder. Where a final response to a complaint has already been issued prior to final resolution of the ‘test case’, a revised final response will be sent.

In the meantime and pending final resolution of the ‘test case’, any decision issued by AXA on a potentially affected claim remains in effect.

What have you told customers who might be affected by this?

We have written to all our policyholders who could be impacted with these letters and we will keep them updated on any and all developments in the test case. Impacted policyholders have been categorised according to the differences in their policies.

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Letter 1

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Issued to customers whose policies contain:

  • No Non Damage Denial of Access (NDDOA) and disease within a 25 mile vicinity
  • Specified diseases only but with NDDOA
  • No cover due to the Trends clause
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Letter 2

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Issued to customers whose policies contain or have been endorsed to include:

  • Specified disease cover only and with no Non Damage Denial of Access (NDDOA)
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Letter 3

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Issued to customers whose policy contains:

  • Unlisted disease cover at the Premises (manifesting at the Premises)

Where can I find out more and what the Regulator is saying?

The Financial Ombudsman Service has provided information on complaints related to business interruption cases on its website.

Your FOS rights are not affected by the ‘test case’. If the normal complaint process is exhausted you can still refer it to the FOS.

For more information about the ‘test case’ or to subscribe to email updates, please visit the FCA’s website.