Highlands and Islands Labour MSP, David Stewart, has applauded today’s High Court judgement backing the Financial Conduct Authority’s (FCA) business interruption insurance test case.
Mr Stewart has continued to raise the problem of the insurance sector failing to pay out for business interruption insurance due to Coronavirus and thus “wriggling out of their obligations” to businesses in his region and throughout Scotland.
The FCA brought the case “in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims and the wider market”.
The court found in favour of the arguments advanced for policyholders by the FCA on the majority of the key issues.
Mr Stewart said: “Early on in this pandemic I began to realise just how devastating it was for companies who had their claims for business interruption insurance turned down.
“Companies were at risk of going under sooner and that put the whole local economy at risk.
“This judgement is a win for all those small and medium businesses who had no chance of taking on the big boys of the insurance world. I do hope that insurance companies will now reconsider some of the claims they rejected, and I would advise businesses to get back to their insurers in the light of this judgement.”
Mr Stewart added that he hoped there would not be an appeal by the insurance sector but if there was that it was dealt with swiftly and without lengthy delays.
The FCA said that most small and medium sized businesses policies were focused on property damage and only had basic cover for Business Interruption as a consequence of property damage. But some policies also covered Business Insurance from other causes, in particular infectious or notifiable diseases (‘disease clauses’) and non-damage denial of access and public authority closures or restrictions (‘denial of access clauses’). In some cases, insurers had accepted liability under these policies. In other cases, insurers had disputed liability while policyholders considered that it existed, leading to widespread concern about the lack of clarity and certainty.
The FCA’s aim in bringing the test case was to urgently clarify key issues of contractual uncertainty for as many policyholders and insurers as possible. The FCA did this by selecting a representative sample of policy wordings issued by eight insurers. The FCA’s role was to put forward policyholders’ arguments to their best advantage in the public interest. 370,000 policyholders were identified as holding policies that may be affected by the outcome of the test case.
In April Mr Stewart found widespread frustration and concern from Highlands and Islands firms over delays in accessing loans and a refusal to pay out on business interruption insurance.
The MSP wrote to business groups across his area asking if banks were making it harder to get business interruption loans and if insurers were refusing to pay out for claims on business interruption insurance policies.
Among those to respond to the MSP’s request, were Chambers of Commerce in Caithness, Moray, Lochaber and Mid-Argyll.
In May Mr Stewart raised the issue at First Minister’s questions asking the Scottish Government Finance Secretary, Kate Forbes, to have direct discussion with the insurance sector about companies who were “wriggling out of their obligations” to Scottish businesses.
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