“Market turns are cyclical, and underwriters should keep squarely in mind their relationships with their insurance buyers for the future”, says Julia Graham
The decision made by an insurer not to appeal against a London High Court ruling that they were wrong to reject business interruption claims has been welcomed by the Association of Risk and Insurance Management (Airmic).
RSA, QBE, Hiscox, MS Amlin , Argenta and Arch were expected to challenge the judgment to pay affected customers holding five types of policy in a fast-tracked Supreme Court case to be heard by the end of 2020. But legal documents show the appeal by at least one of the insurers has now been dropped.
John Ludlow, CEO of Airmic, commented: “News that at least one of the six insurers involved in the High Court test case decision on Covid-19 Business Interruption (BI) coverage has decided not to appeal on the Marsh Resilience policy raises hopes that more claims can be processed without further delay, providing welcome respite for many businesses that made BI claims in the expectation that their insurers would pay out.”
“This news is a welcome indication that insurers can show greater flexibility in the way they do business, something that will be welcome to risk managers and insurance buyers,” he added. ”Many of these buyers are long-term insurance partners and represent companies that are already grappling with hard market prices and harsher terms in 2020, as well as the effects of Covid and the economic downturn, whether they have made a recent BI claim or not.”
The test case was brought on behalf of policyholders by the Financial Conduct Authority (FCA), which said it was seeking clarity on how wordings under ‘the occurrence of human infectious or contagious disease’ and ‘denial of access’ clauses should respond.
In September, the High Court ruled in favour of the FCA’s interpretation of non-damage BI policy wordings across the majority of key contention areas. The judgement on also clarified that the pandemic and the Government and public response were a single cause of the covered loss.
Julia Graham, Airmic’s deputy CEO and technical director, said:“At Airmic, we cautiously welcomed the High Court’s 15 September judgment, which was particularly favourable for those policyholders with Disease clauses rather than Prevention of Access wordings, as representing some welcome good news for many policyholders representing businesses under unprecedented economic strain in 2020.
“Market turns are cyclical, and underwriters should keep squarely in mind their relationships with their insurance buyers for the future. Underwriters showing care for maintaining healthy long-term client relationships will reap the benefits once the hard market momentum dies away.”