By Kirstin Ridley and Carolyn Cohn
LONDON, Nov 17 (Reuters) - Insurers are trying to escape
liability for pandemic-related business losses with
counter-intuitive arguments that go against the essential
purpose of insurance, Britain's markets watchdog told the UK
Supreme Court on Tuesday.
A lawyer for the Financial Conduct Authority (FCA), which
brought a test case against insurers on behalf of policyholders,
said insurers had reached an "extraordinary conclusion" that
business losses were largely uncovered during the coronavirus
pandemic because of the widespread havoc it has caused.
"(Insurers) are saying: 'We insure perils but not ones that
are going to cost us a huge amount of money. We never
contemplated that'. Well, that isn't an answer," Colin Edelman,
the FCA's lawyer, told the second day of a four-day appeal,
watched by thousands of businesses brought to their knees during
the pandemic.
Small businesses from holiday cottage firms to restaurants
and night clubs had to shut down or restrict trading after
government-ordered lockdowns and say they face ruin after
insurers rejected claims for business interruption cover.
The case revolves around whether 21 policy wordings,
affecting potentially 700 types of policies, 60 insurers,
370,000 policyholders and billions of pounds in claims, should
cover disruption caused by responses to the virus.
The wordings cover business interruption when insured
premises cannot be accessed because of public authority
restrictions, in the event of a notifiable disease within a
specified radius and hybrid wordings.
Tuesday's hearing focused on how insurance law clauses, such
as a so-called "but for" test, disease, composite peril,
prevention of access and trends, should be applied in the case.
A lower court in September found largely in favour of the
FCA and the Hiscox Action Group, a policyholder action group
that represents hundreds of policyholders that has joined the
lawsuit, when judges ruled some insurers were wrong to reject
claims.
But the FCA, the action group and six insurers -- Arch
, Argenta, Hiscox, MS Amlin
, RSA and QBE -- are all challenging
elements of the ruling they lost.
Insurers, which have said they are paying valid claims,
argue that most disease or "prevention of access" clauses in
insurance policies do not cover the pandemic and that any
pay-outs should reflect the wider economic downturn caused by
coronavirus.
"An expansionist approach to the construction of insurance
clauses is ... not an appropriate or principled solution," John
Lockey, a lawyer representing Arch, told the hearing.
Jonathan Gaisman, a lawyer for Hiscox, said prevention of
access clauses were designed only for closure by a public
authority in situations specific to a business premises, such as
the presence of rats or mice, food poisoning or drainage
problems, as well as certain diseases.
"Lockdown in the case of a worldwide pandemic is totally
different," he said.
(Reporting by Kirstin Ridley and Carolyn Cohn. Editing by Jane
Merriman)
