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Updated 11th June 2020

Introduction:

Much has happened since our last website update on this topic. We have been working continually behind the scenes and activities are still ongoing. Given the passage of time we feel it appropriate to post an update, despite still not having a final, definitive position.

This update is by necessity fairly long, but as this situation has affected a number of you seriously, we wanted to give as much information as possible about the context for the next steps. For those of you affected, please read both parts of the progress update – Balens actions and the FCA Legal review.

The update summarises:

  • Our actions taken, and progress made, with Covea, the UK insurer of our ‘Bridge Business Protection Standard Plus’ (Bridge) policy, the contract held by the greatest number of our Commercial Health & Wellbeing customers;
  • The Financial Conduct Authority (FCA) current position regarding their legal ‘test case’ action, aiming to bring clarity to the cover position of most Small & Medium Enterprise (SME) customers. You are likely aware from media coverage of the FCA activity. We see this as the most significant development in the quest for clarity and dispute resolution; and
  • Our proposed next steps, with rationale for following the FCA developments as the most influential, practical and expedient means of reaching a final position.

Whilst the update focuses upon Covea, much content – particularly regarding the Financial Conduct Authority (FCA) actions – has wider applicability.

PROGRESS UPDATE PART 1 – BALENS ACTIONS

Covea’s original stance – officially given to us in March – was that no cover applied in any circumstances under the Bridge policy, and to decline all claims. We successfully challenged that position, gaining confirmation that individual policies may respond dependent upon the specific circumstances, assessed on a case-by-case basis.

Whilst useful progress, we considered Covea’s response still did not give adequate clarity for our customers, and their explanation of how policies may respond (on a limited basis) too vague.

To validate our views, we invested in our own independent legal advice. The advice showed the arguments on interpretation of language to be complex and finely balanced. Our view as broker was that – in the absence of a clearer rationale from Covea - interpretation in such circumstances should favour our policyholders, especially those with a known, evidencable exposure to Covid at their premises, in making a successful claim. We also recognised that assessing the value of attributable losses would be a separate, complicated matter.

Accordingly, our Executive Chairman, David Balen, issued a lengthy formal challenge to Covea on behalf of policyholders, requesting Covea reconsider their position and provide an adequately detailed rationale for the conclusions reached following David’s representations.

The letter successfully elicited a very detailed response from Covea, along with the text of a letter they intend to send to policyholders who have lodged a claim and/or formal complaint with them. The letter also serves as their ‘blueprint’ response to new claim enquiries. The text of that letter is available here. Despite some of Covea’s conclusions, we consider securing the detailed response a significant step forward, providing the full legal and underwriting arguments we requested. Among other things, the Covea response confirms, in detail, their reasoned views on:

  • Who can claim;
  • The extent of coverage available by the Bridge policy’s infectious diseases clause, and
  • How they intend to value claims settlements – giving the insurer’s view on the matter we expected to be complicated.

Covea’s comprehensive response gives the clarity we, and policyholders, were lacking, and in our view fairly addresses many of our questions. Customers who wish to submit a claim strictly based on the criteria detailed in the Covea letter should do so, as invited, direct to Covea by email to technical claims team manager James.Kemp@coveainsurance.co.uk.

It is clear Covea consider their position final. Despite the welcome clarity we feel some issues remain potentially contestable, particularly the evidential burden to prove a premises outbreak and Covea’s proposed basis of settlement. Both of these matters are considerations for the FCA exercise, see next section.

PROGRESS UPDATE 2: THE FCA LEGAL REVIEW

In parallel with the Balens actions, on 15/5 the FCA invited policyholders and brokers to contribute to the fact-base underpinning the FCA’s market-wide action, with a tight deadline of 20/5/20. We took opportunity to contribute the exercise, making the FCA aware of the Bridge wording and our concerns.

On 1/6, the FCA published a comprehensive status update with supporting documents, and a ‘Guidance note for Firms’ (firms being insurers and brokers) detailing actions needed by insurers to comply with the FCA legal process.

The objective of the FCA exercise is to bring clarity to SME customers over the validity of Business Interruption claims. The FCA will “put forward policyholders’ arguments to their best advantage in the public interest”. This is to be achieved by a legal test of what the FCA consider a “representative sample” of all market wordings, with judgements on those specific wordings acting as precedents for interpretation of similar wordings used by other insurers.

The FCA emphasise that the action in itself does not indicate that they expect all or any of the tested wordings to respond to claims.

The FCA process is set to report judgements, and implications thereof, by the end of July.

We recommend for the full picture you access the FCA status update via https://www.fca.org.uk/news/press-releases/update-fca-test-case-validity-business-interruption-claims and the ‘Guidance note to Firms’ at https://www.fca.org.uk/publications/guidance-consultations/business-interruption-insurance-test-case-draft-firms.

On 10 June, the FCA issued a further update on their activities along with final Court documents, available at https://www.fca.org.uk/firms/business-interruption-insurance#latest-updates.

It is our current expectation that the Bridge policy wording will fit within the remit of the FCA exercise, but at this point do not have that guaranteed. We have requested definitive confirmation on this point from the FCA and Covea.

WHAT NEXT? – PROPOSED STEPS:

Considering the Balens’ situation and the wider market and FCA context, the only logical choice is to wait for the outcome of the FCA action before deciding upon what, if any, further formal representations can be made to Covea. We are also obtaining our own further independent legal opinion on the detailed Covea response received, but for obvious reasons the FCA’s exercise – providing industry wide guidance - carries the greatest weight in determining the merit of any further challenge. The FCA’s conclusions will define Covea’s next actions as well as ours.

The FCA are scheduled to report to an aggressive timescale by end July, making their process the most expedient means of arriving at a final conclusion for all concerned.

Whilst it is vital to resolve all individual matters on the basis of the written insurance contract, we accept that it was not the insurer’s intention to cover pandemic losses – the underlying premise of insurance being for the losses of the few to be paid by contributions of the many. The question is whether insurers have adequately converted that intention into practice via their actual policy wordings.

HERE TO HELP:

In closing, the FCA activity proves the industry-wide nature of this matter, and we support the Regulator taking the lead role in bringing clarity to the whole market. We feel we have done everything in our power as Brokers to represent our customers’ interests.

We trust this update offers a clear perspective of the ‘big picture’ and please note the information provided is our full guidance on the issue and phoning the office will not provide any further clarity on general matters for you.

However, we recognise that there may be some exceptional circumstances where a specific customer query is not addressed by the update. As ever at Balens, our emphasis is on helping our valued customers at all times, and particularly when you need us most, so for these exceptional matters we have systems and processes in place to ensure support:

  • Please contact us at ComBus@balens.co.uk where a dedicated Senior Team Member will review the cases and give feedback on individuals circumstances.
  • Our Claims Manager will review all cases that require attention, particularly those that are not our insured under the Covea Bridge policy.
  • We understand that you may be unhappy with the fact that your policy may not respond in the way you hoped. If, after reading the full update note, you wish to have specific concerns addressed, to put in a note of dissatisfaction to the , or to make a complaint regarding the policy, this will be carefully looked at and responded to by a senior Team Member. Again, please contact us at ComBus@balens.co.uk
  • If you are unhappy with the service offered by Balens, again, please be assured that we take all complaints very seriously, and concerns will be addressed by a Senior Team Member. Please contact us at Complaints@balens.co.uk
  • As we have noted in other communications, most of our Team Members are now working from home, and whilst our commitment customer service remains strong, this has impacted upon the speed of our usual service standards. We ask that you contact us by e-mail in the first instance to assist us in assisting you.