FCA is consulting on guidance to help policyholders, insurers and intermediaries to judge how to prove the presence of Covid-19 in a particular area. FCA wants to be able to issue the final guidance as soon as the Supreme Court publishes its judgment in the business interruption insurance appeal.
The draft guidance builds on the High Court judgment, which included declarations on the types of evidence policyholders could use to prove the presence of the virus, and the methodologies they could use in the process. The guidance builds on this, and gives FCA’s views on how insurers should assess the evidence when handling claims fairly, FCA says the court declarations on which is guidance is based are not under appeal and so the Supreme Court judgment should not affect them.
While the guidance is intended for use in relation to business interruption insurance policies, it will be of interest in respect of all policies to which the pandemic is relevant.
The guidance is stated to be relevant where a relevant policy clause requires the presence of disease within a particular distance of the premesis, requires its presence within an area where events that occur in the area would be reasonably expected to have an impact on the policyholder or requires the occurrence of a notifiable disease generally.
The guidance works through four types of potential evidence:
- specific evidence;
- NHS data on deaths due to Covid-19;
- ONS data on deaths due to Covid-19 and
- reported cases of Covid-19 in different areas
But, if none of these are enough, FCA also makes suggestions based on a method of geographical distribution, where reported cases are averaged across an area, or “uplifting” case numbers using an undercounting measure, since not all cases were detected by the Government.
The guidance also contains FCA’s views on what certain terminology used in some policies should mean – such as “vicinity” and “occurred”.
FCA asks for comments by 18 January 2021.