Legal action into Business Interruption

Financial Conduct Authority

In line with UK market practice, NFU Mutual’s standard Business Interruption (BI) cover usually requires damage to property, such as the damage caused by a storm or fire, in order to be triggered, which means that many of our customers will not be covered for Coronavirus losses. 

The lack of cover for pandemics like COVID-19 is not a UK phenomenon nor is it restricted to NFU Mutual. No insurance market can afford to underwrite the scale of losses a pandemic can bring, and policies reflect that reality. On 1 May 2020, the FCA announced its intention to obtain a court declaration via a test case to resolve uncertainty over a number of non-damage Business Interruption (BI) policy wordings which insurers believe are not triggered by the pandemic.   

NFU Mutual offers this type of cover in three parts of our commercial policy wordings. In order to ensure that the outcomes of the test case can be used to provide clarity for the widest possible number of businesses impacted by
COVID-19, the FCA has also produced guidance for insurers, which requires firms to;

  • Conduct a review of relevant policy wordings. 
  • Communicate the outcome of that review and inform policyholders as to whether the test case will provide further clarity about how policy wordings should be interpreted. 
  • Respond to claims and complaints promptly and fairly once the outcome of the test case is known. 

NFU Mutual has reviewed the relevant policy wordings issued to commercial customers. We do not consider that disruption caused by COVID-19 is covered under any of these. 

The three wordings are: 

  • There is an extension available for Human Diseases which some commercial customers may have as part of their policy. This provides cover if premises need to close, or their use is restricted, as a result of a list of diseases specified in the customer’s policy document. Coronavirus (or COVID-19) is not included on that list. The test case will not be considering any policy wordings which include a specified list of diseases. In addition, the test case will not be considering policy wordings which require the disease to be at the policyholder’s premises; as our wording does. 
  • Our commercial policies also include some limited cover for interruption caused by a Public Emergency, but this cover specifically excludes infectious or contagious diseases. 
  • Finally, some of our Select policies have an endorsement that covers Prevention of Access when an incident has occurred, in certain limited circumstances – this endorsement does not provide cover for the nationwide lockdown that has followed the outbreak of COVID-19.  

However, some of the policy wordings used in the test case for Prevention of Access are similar to ours. As such, it’s possible that the outcome of the test case could result in us reconsidering our previous decision on these claims. If this happens, we'll contact all customers who have already made a claim or complaint, or indicated a desire to make a claim, in order to confirm this outcome and the actions we'll be taking to resolve their claims.  

The court action is now getting underway with the FCA planning for a trial date later in July.  If the court decide in favour of policyholders, then the FCA will expect insurers to review their existing claims decisions, which is what we will do.

NFU Mutual thinks the FCA action is a positive move to deliver certainty for policyholders and insurers. As we learn more, we’ll provide further updates.  

Read the full update from the FCA or to subscribe to email updates on the test case.

You can also find information on the test case on the Financial Ombudsman website.

In May 2020, the Financial Conduct Authority (FCA) announced its intention to obtain a court declaration to resolve uncertainty over a number of non-damage Business Interruption claims notified as a result of the COVID-19 pandemic. 

The FCA has now completed a review of Business Interruption policy wordings, covering over 40 insurers, 500 policy wordings, and more than 1,200 submissions from policyholders, brokers and action groups. This review included information NFU Mutual sent to the FCA.   

The FCA has selected a sample of policy wordings from eight insurers to participate in the test case. Whilst NFU Mutual is not one of those eight insurers, the test case will be considering wordings that are similar to one type of cover offered by NFU Mutual. The court action is now underway with the FCA planning for a trial date later in July.

NFU Mutual has submitted information to the Financial Conduct Authority (FCA) and worked with them and the Association of British Insurers (ABI) to promote a quick resolution.  NFU Mutual is not included in the FCA court action. However, the test case will be considering wordings that are similar to one type of cover offered by NFU Mutual.

We welcome the Financial Conduct Authority’s (FCA) action and support the intent to deliver clarity for customers. NFU Mutual has been contacted by the FCA about Business Interruption cover and we have been working with them and the Association of British Insurers (ABI) to promote a quick resolution.

The Financial Conduct Authority (FCA) invited comments and submissions from individuals and group actions by 5 June 2020.  This has been done to help them fulfil their stated intention of delivering clarity for a representative range of customers and policy wordings.  Your contribution will have helped the FCA’s objective, which we welcome. 

NFU Mutual will be writing to all customers with the policy wordings in question who have asked us to consider a claim or complaint in order to confirm whether the test case has the potential to affect them. 

If we have already confirmed that your claim is covered then the outcome of this test case will not impact your claim as we have already confirmed your cover and are proceeding with paying your claim.