By Carolyn Cohn and Kirstin Ridley
LONDON, Nov 16 (Reuters) - Major insurance companies told
the UK Supreme Court on Monday it was wrong to assume there
could be unlimited cover during a pandemic in an appeal closely
watched by thousands of British businesses devastated by the
coronavirus crisis.
Opening a fast-tracked, four-day hearing into what Britain's
Financial Conduct Authority (FCA) has called the most important
insurance decision of the last decade, a lawyer for insurance
company QBE said a British lockdown to curb a virus was
once unthinkable.
"A year ago, it was utterly inconceivable that the UK
devolved governments closed down almost the entire national
economy and consigned healthy citizens to their homes to prevent
further transmission of a disease," Michael Crane told a
live-streamed hearing.
But he added: "...it is a fallacy to assume from the fact
that a particular risk might have been foreseen as a possibility
at the time of (insurance) contract, that the parties agree ...
to cover it without relevant limits."
Thousands of small firms, from wedding planners to night
clubs, had to shut down or restrict trading during the pandemic
and say they face ruin after insurers rejected claims for
business interruption.
The FCA brought a test case on behalf of policyholders
against insurers in a widely-praised move to offer clarity as
businesses started forming group actions to take on the
insurance industry.
A lower court in September found largely in favour of the
FCA and the Hiscox Action Group, a policyholder action group
that has joined the lawsuit, when judges ruled some insurers
were wrong to reject the claims.
Six insurers -- Arch, Argenta, Hiscox
, MS Amlin, RSA and QBE are appealing
elements of the ruling they lost.
The FCA is also challenging the ruling on whether some
policies only covered local disease outbreaks, whether
businesses have a valid claim if they are only partially closed
and when insurers can reduce payments. The Hiscox Action Group
is also appealing.
Insurers say they are paying valid claims but that paying
out all claims could be catastrophic for the industry.
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 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.
Insurers argue "prevention of access" clauses do not apply
to government restrictions, that pay-outs should reflect the
broader economic downturn caused by the pandemic and that
disease clauses do not cover a nationwide epidemic.
"The fact that we accept that there are 50 outbreaks in a 25
mile radius ... does not mean that we accept we are insuring
those 50 plus another 100,000 from somewhere else," said Simon
Salzedo, a lawyer representing Argenta, told the court.
The UK Supreme Court case is attracting a lot of attention
as companies from countries around the world, including South
Africa and the United States, lock horns with insurers over
pandemic-related claims.
(Editing by Jane Merriman)
