With regard to direct COVID-19 losses, many market commentators are revising their initial loss estimates downward, particularly in the domain of property business interruption (BI). Based on third-quarter earnings announcements to date, reported losses for COVID-19 reached just over USD 25 billion, much of which is incurred but not reported. At this time, there are many steps still to complete before ultimate outcomes are better understood.
In one highly followed COVID-19-related proceeding, the UK Financial Conduct Authority (FCA) recently concluded its COVID-19 business interruption test case. The test case considered English law that governed BI insurance policies with non-damage extensions to coverage, and there were three broad categories: disease notification coverage, prevention of access/public authority coverage and hybrid coverage. On September 15, 2020, in a 162-page opinion, the court reached different conclusions regarding each insurer’s wordings but found in favor of the FCA on the majority of issues.
The Supreme Court (the UK’s highest court) granted permission on November 2, 2020, for a “leapfrog” appeal (bypassing the Court of Appeal) after the FCA, six insurers and a policyholder action group were granted permission by the High Court in October to appeal the judgment.
The FCA BI test case and the many other cases worldwide are reminders that the insurance industry’s policy and treaty wordings require constant care and attention. The construction of thoughtful and well-executed insurance policies and reinsurance treaties is a best practice spotlighted by the industry these last several months.