(Adds comments from insurers' lawyers)
By Carolyn Cohn and Kirstin Ridley
LONDON, Nov 16 (Reuters) - Major insurance companies told
the UK Supreme Court on Monday that thousands of small companies
battered by the coronavirus pandemic were not eligible for
business interruption payouts and to suggest differently was
"reverse engineering".
On the first day of a four-day appeal of a test case brought
by Britain's Financial Conduct Authority (FCA) against insurers,
industry lawyers told top judges that businesses could not claim
for losses stemming from nationwide lockdowns to curb the virus.
Gavin Kealey, a lawyer for insurer MS Amlin,
said that only business losses related to COVID-19 infections
within a 25-mile radius of insured properties were covered.
"If these insureds wanted pandemic cover or epidemic cover
on a national scale, then they didn't get it," he said "... You
can't reverse engineer those cases ... No, FCA, insureds, we are
awfully sorry, but no."
Thousands of small firms from holiday cottage firms to
restaurants and night clubs had to shut down or restrict trading
during the pandemic 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 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.
Michael Crane, a lawyer for insurance company QBE,
told the live-streamed hearing that QBE had foreseen a possible
pandemic -- but that a government response that closed down
almost the entire national economy and consigned healthy
citizens to their homes was "inconceivable" last year.
But he added: "The fact that a contingency may have been
foreseeable does not mean that an underwriter agreed to cover
that contingency without limits."
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.
But the FCA -- and the action group -- are challenging
elements of the ruling, including whether businesses have a
valid claim if they are partially closed and when insurers can
reduce payments.
Six insurers -- Arch, Argenta, Hiscox
, MS Amlin, RSA and QBE -- are also appealing.
Insurers say they are paying valid claims but that paying
out all claims could be catastrophic for the industry.
They argue that "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.
Companies in countries from South Africa to the United
States are locking horns with insurers over pandemic-related
claims.
(Editing by Jane Merriman and David Evans)
Hiscox (HSX)