UPDATE 1-Test case over virus-hit British business insurance will be legally binding -FCA

(Adds detail, background)

LONDON, May 15 (Reuters) - Britain's Financial Conduct
Authority said on Friday that a test case it is bringing to
clarify uncertainty over whether small businesses can claim
compensation for disruption caused by the coronavirus pandemic
would be legally binding.

The regulator turned to the courts after small businesses
such as restaurants, cafes and nightclubs said their insurance
claims related to the coronavirus pandemic were being denied.

A national lockdown to fight the pandemic has forced many
companies to temporarily suspend operations and furlough staff.

The results of the case would also provide "persuasive
guidance" for the interpretation of similar policy wordings and
claims in other court cases, the FCA said in a statement.

The FCA said there was "continuing and widespread concern
about the lack of a positive response of some of those business
interruption insurance policies, and the basis on which some
insurers are making decisions in relation to claims".

The FCA said earlier this month it would bring the case and
was seeking responses from a "small number of firms" by Friday
before deciding which insurers should take part.

Several groups of small businesses have said they were
seeking legal guidance over policies issued by top insurers such
as AXA, Allianz, Hiscox, RSA
, QBE and Zurich.

QBE has said it received a letter from the FCA, while RSA
said last week it had not.

Zurich said this week that the FCA had asked for its stance
on the topic, while other insurers have not commented.

Insurers have said they aimed to pay valid claims quickly.

Broker Willis Towers Watson estimates UK insured losses for
business interruption, together with event cancellation, could
total up to $14 billion in relation to the pandemic, depending
on policy wordings.

The FCA said it had instructed law firm Herbert Smith
Freehills, and invited policyholders to send it details of
disputed claims.

The test case is expected to take place in July.
(Reporting by Carolyn Cohn
Editing by Maiya Keidan and Louise Heavens)