BI Insurance Update – FCA Publishes Draft Guidance on Proving the Presence of COVID-19
At the end of last week, the FCA announced that it had commenced a consultation exercise on a piece of draft guidance it has prepared to assist policyholders, insurers and insurance intermediaries to prove the presence or otherwise of COVID-19 in a particular area, which is a requirement of some Business Interruption (BI) policies.
This has been released as the outcome of the appeal in the BI Insurance test case is awaited. The High Court found in October that out of the 21 policy types, 12 had the potential to provide cover in response to COVID-19. A judgment from the Supreme Court is expected by January 2021.
The FCA notes however that, as none of the declarations made by the High Court in relation to proving the presence of COVID-19 are under appeal, the content of the draft guidance will not be impacted by the Supreme Court decision. The FCA has therefore said that it is not “pre-judging the outcome of the appeals” by launching the consultation now, and has confirmed that the guidance will be amended if necessary.
In the draft guidance, the FCA seeks to explain what types of evidence and methodologies policyholders can use to prove the presence of COVID-19, in light of the High Court’s declarations on the subject, as well as providing some links to useful information.
The guidance also provides insight into the FCA’s views on how insurers should assess evidence relating to the presence of COVID-19 in order to handle claims fairly and within the context of FCA rules, which include the Principles for Businesses and the Insurance: Conduct of Business Sourcebook.
The FCA has stated that the purpose for releasing the guidance now is to “help ensure that the process of proving the presence of coronavirus is made as simple as possible for policy holders” to enable claimants to receive payments as early as possible once the Supreme Court reaches its decision.
The short deadline to provide comments on this consultation is 18 January 2021. If the guidance is issued following the consultation, it will be in effect from the date it is issued until 31 December 2021.