“What we have here is insurers studiously avoiding the fundamental underlying issue in all of these clauses which is an emergency or a disease,” said Colin Edelman, QC representing the FCA on behalf of small and medium sized enterprises (SMEs) in the UK.
“They ignore that and they say something else is the essence of the peril, and then they define and redefine that, and our submission is that there is certainly no authority for this process and there’s no rational justification for it either.”
Edelman took issue with the insurers’ case, argued by their lawyer Gavin Kealey QC, claiming that the prevention of access to businesses due to the government shutdown does not constitute an insured peril.
“Prevention of access, in Mr. Kealey’s example, isn’t an insured peril in its own right because in its own right it isn’t a qualifying interruption. It needs to be coupled with all the other factors and they either all come in, or they all go out,” said Edelman.
Kealey is representing eight insurers including Hiscox and Zurich Insurance. The eight insurers were selected by the FCA to participate in the case, however the regulator cites sixteen insurers who use at least one of the policy wordings undergoing examination.
Also representing the FCA, Leigh-Ann Mulcahy QC, told the court today that there is dispute between the claimants and the defendants relating to the treatment of concurrent independent causes behind business interruption. Insurers are claiming that if there are two independent causes for an event – such as a pandemic and a government-imposed lockdown – and one is excluded in a policy, then the policy should not pay out. Mulcahy disagreed.
“We are saying where the causes are interlinked, where there’s a commonality, where there’s a relationship, one looks at what was intended by the policy and in that circumstance one of the causes may not be insured, but it’s not excluded. And if it’s contemplated as a cause by the policy, then we say there is cover,” she said.
The case is expected to continue for two weeks, with the defendants’ oral submissions beginning on July 23.