Regulator to take insurers to court over coronavirus claims

The UK's finance watchdog has said it plans to take some insurers to court because they have not paid claims from businesses affected by the coronavirus.

It follows calls from firms, some of which say they could go under, because insurers have refused to pay losses related to the lockdown.

But the Financial Conduct Authority (FCA) has said some of those policies may cover losses from the pandemic.

It will now ask a court to decide whether insurers should be made to pay.

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Each insurance company sells slightly different coverage which will be set out in the policy - a contract that states the situations in which the insurer must pay a claim.

Following the lockdown, which has forced factories, shops, pubs, leisure centres and other businesses to close their doors, many firms looked to insurers to cover some of their losses under so-called business interruption policies.

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In a statement, the FCA said some policies included cover for infectious diseases and closures as a result of government restrictions.

The regulator said it had written to a "small number" of insurers, which it refused to name, asking them to state whether they believe their policies cover financial losses suffered by companies as a result of the lockdown.

"We have been clear that we believe in the majority of cases, business interruption insurance was not purchased to, and is unlikely to, cover the current emergency," the FCA's interim boss Christopher Woolard said.

"However, there remain a number of policies where it is clear that the firm has an obligation to pay out on a policy."

He added: "Our intended court action is designed to resolve a selected number of key issues causing uncertainty as promptly as possible and to provide greater clarity for all parties, both insured and insurers.

"It is clear that decisive action is appropriate given the severity of the potential consequences for customers."

The FCA refused to name the insurers it had written to.

Louise Richley runs Beyond Digital Solutions, which provides electronic displays to the likes of Greggs and Jaguar Land Rover.

But with bakeries and car dealerships forced to close during the lockdown, she has had to furlough all but two of her 15 employees and shut the office.

Louise Richley of Beyond Digital Solutions is considering taking legal action against her insurer

Her insurance policy from Hiscox says it covers financial losses of up to £100,000 if the business is unable to use its premises following "an occurrence of any notifiable human disease".

Ms Richley expects to lose more than that. "I have got costs going out all the time for rent and all the rest of it - and I'm getting no value back for that."

'Hit hard'

"The other huge issue is the lost sales pipeline and all the work I have done with clients," said Ms Richley who was expecting four new orders to be signed before the lockdown came into force.

"Whether or not they'll come back, goodness knows," she said. "We're a small business so these things hit us really hard."

Hiscox has told her that her claim is not covered because the policy was not written to cover events like the coronavirus pandemic.

Without a payout from her insurer, she has been forced to take out a loan. Ms Richley says she is now considering taking legal action against Hiscox.

Hiscox said: "We review every case individually, and if any customer has concerns about the application of their policy, we encourage them to get in touch with us directly."

The FCA said that insurers had two weeks to respond to its letter.

It will then "consider which firms to ask to join the court process", it said.

The watchdog also suggested some customers could complain of policies that had been mis-sold by their insurer or broker.

The Association of British Insurers said it would "support any process that will provide clarity and certainty for the minority of customers who are disputing whether they should be covered".