By Carolyn Cohn
LONDON, July 23 (Reuters) - Business interruption insurance
is designed to pay out when firms are required to close due to a
local outbreak of disease but not for a national lockdown, the
London High Court was told on Thursday.
Britain's markets watchdog has taken eight insurers,
including Hiscox, RSA, QBE and Zurich
, to court to resolve a dispute over policy wordings.
Small businesses, from restaurants to leisure groups, said
they faced ruin after insurers rejected their attempts to claim
millions of pounds collectively in compensation for lost
business.
The Financial Conduct Authority says the coronavirus
pandemic should trigger payments under the policies, which
provide cover when insured premises cannot be used because of
restrictions imposed by a public authority and in the event of a
notifiable disease within the local area.
The policies typically use a radius of 25 miles to represent
the local area.
Gavin Kealey, a lawyer representing the insurers, said the
policies did not cover a wider outbreak, such as the coronavirus
pandemic which triggered a country-wide lockdown in March.
"That is not the peril insured against or remotely the peril
insured against."
This was in contrast to a recent local lockdown due to a
resurgence in cases in the Midlands city of Leicester.
"There is no doubt in my mind that according to the correct
wording, there will be coverage for that," Kealey said.
"The lockdown is within a circle of 25 miles."
The FCA, which is concerned customers should be treated
fairly, said in its skeleton argument last week that the
policyholders in the case were "generally not sophisticated or
well-resourced insurance buyers".
Kealey said that the insurers should also be treated fairly.
"These insurers are not bad people."
The FCA says the policy wordings under scrutiny in the
eight-day case are similar to wordings used by more than 60
insurers in total. Around 370,000 policyholders could be
affected.
The hearing is due to conclude on July 30.
(Editing by Elaine Hardcastle)
