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Liberty Specialty Markets

UK regulator sets out case for BI virus cover

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The coronavirus outbreak has become so widespread in the UK that business interruption policies with distance restrictions would be triggered, the Financial Conduct Authority (FCA) is arguing in a High Court test case.

“Those clauses which provide cover only where there was a danger, emergency, threat, disease, public authority action or other trigger within a certain distance or vicinity of the premises will usually be triggered by early/mid March,” it says.

“COVID-19 was a national emergency and danger (hence the national measures implemented), and so automatically occurred within the vicinity, within 25 miles etc, without the need to prove any local COVID-19 event.”

The FCA also says, when it comes to policy intention, wordings are to be “construed objectively”.

“The defendant’s subjective intentions, or their reasons behind the design of the wordings, is not relevant or admissible,” it argues in a particulars of claim document lodged this week.

The document says the Government’s coronavirus response is sufficient to trigger cover for businesses that were not ordered to close at all, or completely.

“The package of other measures, beyond ordering closure of premises, was sufficient to satisfy these policy triggers on their proper construction. In particular, businesses were unable to operate normally,” it says.

The FCA is pursuing the test case, taking the side of policyholders, to help resolve disputes over business interruption policies.

The regulator has selected a representative sample of 17 wordings and has asked some of the insurers who underwrite policies in the sample to take part in the case.

The eight insurers participating are QBE, Arch Insurance, Argenta Syndicate Management, Ecclesiastical Insurance Office, Hiscox, MS Amlin, Royal & SunAlliance and Zurich.

The first case management conference before a Judge is expected to take place next Tuesday and the court hearing is expected in the second half of next month.

More than 270 submissions from policyholders and other stakeholders have been made to the FCA about the case since the start of the month.

The UK confirmed its first COVID-19 cases on January 31 and it became a notifiable disease in England and Wales on March 5 after similar declarations in Scotland and Northern Ireland.

On March 20 the UK Prime Minister Boris Johnson announced that cafes, pubs, bars, restaurants and other leisure venues would have to close that night and confirmed the public should stay at home.

The FCA document is available here.