Business Interruption Scandal: agents await decision on pay-out

Agents are awaiting the outcome of a test case regarding Business Interruption Insurance, which may determine whether they receive thousands of pounds in pay-outs.

The test case concluded yesterday after eight days, and involved a sample of 17 insurance policy wordings, collected by the Financial Conduct Authority.

The FCA brought the test case against eight insurance companies and the result is likely to affect insurance claims by some 350,000 small and medium sized firms, including hundreds - possibly thousands - of estate and lettings agencies.

Last week the legal team acting for the FCA argued in court that the pandemic and its consequences, including the lockdown, should be treated as a single cause of lost income for policy holders, thus triggering pay outs.

This week a lawyer for one high profile insurer used by many agencies - Hiscox - attacked the FCA for its “legally startling” claims; the insurers included in the action claim asserted that the pandemic and its fallout have to be separated into components. Some of those components would not trigger pay outs, the insurers claim.

Many estate agencies are believed to be amongst the thousands of companies disputing their insurers’ interpretations of liability under different Business Interruption policies; most insurers claim such policies do not cover closures forced by pandemics such as Coronavirus.

Agents who have been in touch with Estate Agent Today say they believe their BI policies cover circumstances where there is an inability to enter and use normal business premises - for example, during the lockdown. 

Others have told EAT their policies cover issues regarding instructions from national or local government to cease trading - again, relevant to the lockdown, they claim.

The FCA’s 184-page claim named eight companies - Arch Insurance (UK); Argenta Syndicate Management; Ecclesiastical Insurance Office; Hiscox Insurance Company; MS Amlin Underwriting; QBE UK; Royal and Sun Alliance; and Zurich Insurance.

Whatever way the verdict goes, it is unlikely to be known until September at the earliest; then the losing side may well appeal to the Supreme Court, so it could be near the end of the year before a final resolution is established.

Here you can see a transcript of each day of the hearing.