Every crisis develops in two phases: identification and understanding, followed by action. And in the world of Covid-19 claims we’re now moving into the second. We’ve spent many weeks understanding and analysing policies and, latterly, the repudiation letters, often coming out in common form without regard for the individual policyholders’ policies and circumstances.

It’s time for the second phase. Time to help policyholders and their brokers. You will shortly have from us our outline of future action and our proposals for FOS referral for eligible complainants. We recommend the FOS route where possible for a number of reasons. Litigation costs can run up eye-watering figures quickly, though the process itself is rather slower. In the event of a favourable decision, the ombudsman awards interest at 8% from the date of the repudiation. And the FOS’s basis of decision is the fair and reasonable principle, rather than strict construction of policies.

There’s no certainty in the process: we’ve seen some perverse decisions both for and against our clients, and stage one decisions favourable to the policyholder can be appealed by the insurer to an ombudsman. We hope that the FCA, which is now seeking legal clarity through the courts, will work closely with the ombudsman service to ensure consistency. We have been in touch with the FCA sharing our experiences to give the regulator a broad survey of what insurers are doing and how.

In all the discussion we’ve seen so far, there’s an absence of one element we think important. It’s possible that the closure will lead to many businesses stopping working permanently, the owners suffering cash problems, or deciding to close down and restart later, or taking early retirement. Many policies say that if there is a cessation of trading during the policy year, all benefit under the BI section is forfeited. So, what of the owner, forced to close down, whose claim is later validated by the court or the FOS? Can the insurer enforce the cessation clause? And if so, might the policyholder have a damages claim against the insurer for failure to pay a due sum on time? That’s an area we’re currently investigating.

In the meantime, we’re here to help.

Every crisis develops in two phases: identification and understanding, followed by action. And in the world of Covid-19 claims we’re now moving into the second. We’ve spent many weeks understanding and analysing policies and, latterly, the repudiation letters, often coming out in common form without regard for the individual policyholders’ policies and circumstances.

It’s time for the second phase. Time to help policyholders and their brokers. You will shortly have from us our outline of future action and our proposals for FOS referral for eligible complainants. We recommend the FOS route where possible for a number of reasons. Litigation costs can run up eye-watering figures quickly, though the process itself is rather slower. In the event of a favourable decision, the ombudsman awards interest at 8% from the date of the repudiation. And the FOS’s basis of decision is the fair and reasonable principle, rather than strict construction of policies.

There’s no certainty in the process: we’ve seen some perverse decisions both for and against our clients, and stage one decisions favourable to the policyholder can be appealed by the insurer to an ombudsman. We hope that the FCA, which is now seeking legal clarity through the courts, will work closely with the ombudsman service to ensure consistency. We have been in touch with the FCA sharing our experiences to give the regulator a broad survey of what insurers are doing and how.

In all the discussion we’ve seen so far, there’s an absence of one element we think important. It’s possible that the closure will lead to many businesses stopping working permanently, the owners suffering cash problems, or deciding to close down and restart later, or taking early retirement. Many policies say that if there is a cessation of trading during the policy year, all benefit under the BI section is forfeited. So, what of the owner, forced to close down, whose claim is later validated by the court or the FOS? Can the insurer enforce the cessation clause? And if so, might the policyholder have a damages claim against the insurer for failure to pay a due sum on time? That’s an area we’re currently investigating.

In the meantime, we’re here to help.