The U.K. High Court has issued a ruling concerning the UK Financial Conduct Authority’s (FCA) test case on pandemic-related business interruption claims against 21 representative policies issued by 8 insurers.
Although the ruling has provided UK insurers and policyholders with more clarity, the FAIR campaign does not believe that the verdict will be relevant in the US regarding the current BI litigation landscape.
The Future of American Insurance & Reinsurance (FAIR) campaign was launched by the Insurance Information Institute (Triple-I) earlier this year as an educational resource to ensure fairness for customers and to safeguard the role of insurers.
FAIR’s conclusion is due to the FCA already making the decision that COVID-19 doesn’t cause property damage earlier on in the pandemic. Policies examined in this test case excluded those with language requiring direct physical damage to property.
FCA’s test case examines BI policies within the “miscellaneous financial loss insurance” class of insurance, which is specific to Europe’s regulatory scene and excludes physical damage prerequisite.
Contrary to the U.K., the requirement of a direct physical damage to property in the U.S. is fundamental across most standard BI policies.
To date, there has been a growing list of court decisions in state courts across the U.S. that prove standard BI policies don’t cover COVID-19 shutdowns. Direct physical loss or damage must occur for a BI claim to be triggered, and government orders do not constitute direct physical loss or damage to property.
Founder and managing member of Centres for Better Insurance Jason Schupp commented: “In Europe, FCA authorization to provide miscellaneous financial loss insurance allows an insurance company to write business interruption insurance that does not require evidence of property damage,
“The outcome of the U.K. litigation is unlikely to be relevant to the dozens—or perhaps hundreds—of business interruption lawsuits making their way through U.S. courts, where the property damage question is front and centre.”